Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of L3Harris Technologies, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of L3Harris Technologies, Inc. (the Company) as of January 2, 2026 and January 3, 2025, the related consolidated statements of operations, comprehensive income, cash flows and equity for each of the three years in the period ended January 2, 2026, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at January 2, 2026 and January 3, 2025, and the results of its operations and its cash flows for each of the three years in the period ended January 2, 2026, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of January 2, 2026, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 12, 2026 expressed an unqualified opinion thereon.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosure to which it relates.

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			Cost estimation for revenue recognition on development and production contracts
Description of the Matter			As described in the consolidated financial statements, the Company recognized revenue for certain of its development and production contracts over time, typically using a percentage of completion cost-to-cost method, which required estimates of costs at completion for each contract. At the outset of each contract, the Company gauges its complexity and perceived risks and establishes an estimated total cost at completion with these expectations. After establishing the estimated total cost at completion, the Company reviews the progress and performance on its ongoing contracts at least quarterly and updates the estimated total cost at completion. Such estimates are subject to change during the performance of the contract and significant changes in estimates could have a material effect on the Company’s results of operations. Auditing the cost estimation for revenue recognition on development and production contracts where revenue is recognized over time using the percentage of completion cost-to-cost method involved subjective auditor judgment because the Company’s development of the estimated total cost at completion requires estimates of the cost of the work to be completed based on the Company’s underlying assumptions around achieving the technical, schedule and cost aspects of its contracts. In determining the estimates of the cost of the work to be completed, the Company considered the nature and complexity of the work to be performed, subcontractor performance and the risk and impact of delayed performance. Estimates of total cost at completion are also affected by management’s assessment of the current status of the contract and expectation for performance on the contract, as well as historical experience.
How We Addressed the Matter in Our Audit			We obtained an understanding, evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s accounting for cost estimation for development and production contracts. For example, we tested certain controls over management’s review of the estimate at completion analyses and the significant assumptions underlying the estimated total costs at completion. We also tested certain of management’s controls to validate that the data used in the estimate at completion analyses was complete and accurate. To test the cost estimation for development and production contracts, our audit procedures included, among others, obtaining an understanding of the contract, meeting with program management to confirm our understanding of the risks associated with the arrangement and the current contract performance, review of customer correspondence and contractual milestones and comparing cost estimates to historical cost experience with similar contracts, when applicable. Additionally, we obtained an understanding of the Company’s past performance of estimating total costs at completion by reviewing changes in the cost estimates from previous periods and reviewing the overall accuracy of management’s cost to completion estimations through lookback analyses.

/s/ Ernst & Young LLP

We have served as the Company’s auditor since at least 1932, but we are unable to determine the specific year.

Orlando, Florida

February 12, 2026

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CONSOLIDATED STATEMENT OF OPERATIONS

			Fiscal Year
(In millions, except per share amounts)			2025						2024						2023
Revenue
Products			$	15,487					$	15,134					$	13,694
Services			6,378						6,191						5,725
Total revenue			21,865						21,325						19,419
Cost of revenue
Products			(11,252)						(11,019)						(9,711)
Services			(4,988)						(4,782)						(4,595)
Total cost of revenue			(16,240)						(15,801)						(14,306)
General and administrative expenses			(3,430)						(3,568)						(3,313)
Impairment of goodwill and other assets			(85)						(38)						(374)
Operating income			2,110						1,918						1,426
Non-service FAS pension income and other, net			419						354						338
Interest expense, net			(597)						(675)						(543)
Income before income taxes			1,932						1,597						1,221
Income taxes			(326)						(85)						(23)
Net income			1,606						1,512						1,198
Noncontrolling interests, net of tax			—						(10)						29
Net income attributable to L3Harris			$	1,606					$	1,502					$	1,227
Earnings per share attributable to common shareholders
Basic			$	8.57					$	7.91					$	6.47
Diluted			$	8.53					$	7.87					$	6.44

See accompanying Notes to Consolidated Financial Statements.

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CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

			Fiscal Year
(In millions)			2025						2024						2023
Net income			$	1,606					$	1,512					$	1,198
Other comprehensive income, net of tax:
Foreign currency translation and other, net			97						(65)						50
Pension and other postretirement benefits			(5)						290						40
Other comprehensive income			92						225						90
Comprehensive income			1,698						1,737						1,288
Noncontrolling interests, net of tax			—						(10)						29
Comprehensive income attributable to L3Harris			$	1,698					$	1,727					$	1,317

See accompanying Notes to Consolidated Financial Statements.

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CONSOLIDATED BALANCE SHEET

(In millions, except shares)			January 2, 2026						January 3, 2025
Assets
Current assets
Cash and cash equivalents			$	1,069					$	615
Receivables, net			1,371						1,072
Contract assets			3,566						3,230
Inventories, net			1,219						1,330
Income taxes receivable			53						379
Other current assets			431						461
Assets of business held for sale			884						1,131
Total current assets			8,593						8,218
Non-current assets
Property, plant and equipment, net			2,665						2,806
Goodwill			20,010						20,325
Intangible assets, net			6,509						7,639
Deferred income taxes			76						120
Other non-current assets			3,342						2,893
Total assets			$	41,195					$	42,001
Liabilities and equity
Current liabilities
Short-term debt			$	—					$	515
Accounts payable			2,461						2,005
Contract liabilities			2,262						2,142
Compensation and benefits			482						419
Other current liabilities			1,908						2,317
Liabilities of business held for sale			113						235
Total current liabilities			7,226						7,633
Non-current liabilities
Long-term debt, net of current portion			10,443						11,081
Deferred income taxes			1,114						942
Other non-current liabilities			2,777						2,766
Total liabilities			21,560						22,422
Equity
Shareholders’ Equity:
Common stock			187						190
Paid-in capital			15,117						15,558
Retained earnings			4,212						3,739
Accumulated other comprehensive income			119						27
Total shareholders’ equity			19,635						19,514
Noncontrolling interests			—						65
Total equity			19,635						19,579
Total liabilities and equity			$	41,195					$	42,001

See accompanying Notes to Consolidated Financial Statements.

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CONSOLIDATED STATEMENT OF CASH FLOWS

			Fiscal Year
(In millions)			2025						2024						2023
Operating Activities
Net income			$	1,606					$	1,512					$	1,198
Adjustments to reconcile to net cash provided by operating activities:
Depreciation and amortization			1,224						1,289						1,166
Share-based compensation			113						97						89
Net periodic benefit income			(330)						(286)						(275)
Share-based matching contributions under defined contribution plans			253						264						231
Impairment of goodwill and other assets			85						38						374
Deferred income taxes			206						174						(423)
(Increase) decrease in:
Receivables, net			(343)						128						124
Contract assets			(437)						(194)						62
Inventories, net			117						96						(182)
Other current assets			17						(29)						(55)
Increase (decrease) in:
Accounts payable			475						(90)						87
Contract liabilities			181						126						195
Compensation and benefits			70						(128)						38
Other current liabilities			(423)						155						(88)
Income taxes			365						(383)						(333)
Other operating activities			(73)						(210)						(112)
Net cash provided by operating activities			3,106						2,559						2,096
Investing Activities
Net cash paid for acquired businesses			—						—						(6,688)
Capital expenditures			(424)						(408)						(449)
Proceeds from sales of businesses, net of cash divested			820						273						71
Other investing activities			11						(128)						45
Net cash provided by (used in) investing activities			407						(263)						(7,021)
Financing Activities
Proceeds from issuances of long-term debt, net			—						2,827						7,568
Repayments of long-term debt			(618)						(2,620)						(3,170)
Change in commercial paper, maturities under 90 days, net			(515)						(567)						623
Proceeds from commercial paper, maturities over 90 days			—						688						1,181
Repayments of commercial paper, maturities over 90 days			—						(1,205)						(205)
Repurchases of common stock			(1,154)						(554)						(518)
Dividends paid			(903)						(886)						(868)
Other financing activities			108						93						(17)
Net cash (used in) provided by financing activities			(3,082)						(2,224)						4,594
Effect of exchange rate changes on cash and cash equivalents			23						(17)						11
Net increase (decrease) in cash and cash equivalents			454						55						(320)
Cash and cash equivalents, beginning of period			615						560						880
Cash and cash equivalents, end of period			$	1,069					$	615					$	560

See accompanying Notes to Consolidated Financial Statements.

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CONSOLIDATED STATEMENT OF EQUITY

			Fiscal Year
(In millions, except per share amounts)			2025						2024						2023
Common Stock
Beginning balance			$	190					$	190					$	191
Share-based compensation			2						3						2
Repurchases and retirement of common stock			(5)						(3)						(3)
Ending balance			187						190						190
Paid-in Capital
Beginning balance			15,558						15,553						15,677
Share-based compensation and other, net			478						460						309
Repurchases and retirement of common stock			(919)						(455)						(433)
Ending balance			15,117						15,558						15,553
Retained Earnings
Beginning balance			3,739						3,220						2,943
Net income and other			1,606						1,501						1,227
Repurchases and retirement of common stock			(230)						(96)						(82)
Cash dividends			(903)						(886)						(868)
Ending balance			4,212						3,739						3,220
Accumulated Other Comprehensive Income (Loss)
Beginning balance			27						(198)						(288)
Other comprehensive income, net of tax			92						225						90
Ending balance			119						27						(198)
Noncontrolling Interests
Beginning balance			65						64						101
Derecognized with divestiture			(63)						—						—
Net income and other			(2)						1						(37)
Ending balance			—						65						64
Total Equity			$	19,635					$	19,579					$	18,829
Cash dividends per share			$	4.80					$	4.64					$	4.56

See accompanying Notes to Consolidated Financial Statements.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1: SIGNIFICANT ACCOUNTING POLICIES

Organization — L3Harris Technologies, Inc., together with its subsidiaries, is the Trusted Disruptor in the defense industry. With customers’ mission-critical needs in mind, we deliver end-to-end technology solutions connecting the space, air, land, sea and cyber domains in the interest of national security. We support customers in more than 100 countries, with our largest customers being various departments and agencies of the U.S. Government, their prime contractors and international allies. Our capabilities have defense and civil government applications, as well as commercial applications. As of January 2, 2026, we had approximately 45,000 employees.

Principles of Consolidation — Our Consolidated Financial Statements include the accounts of L3Harris Technologies, Inc. and its consolidated subsidiaries. As used in these Notes to the Consolidated Financial Statements, the terms “L3Harris,” “Company,” “we,” “our” and “us” refer to L3Harris Technologies, Inc. and its consolidated subsidiaries. Intercompany transactions and accounts have been eliminated.

Fiscal Year — Our fiscal year ends on the Friday nearest December 31. The fiscal years ended January 2, 2026 (“fiscal 2025”), January 3, 2025 (“fiscal 2024”) and December 29, 2023 (“fiscal 2023”) included 52 weeks, 53 weeks, and 52 weeks, respectively.

Use of Estimates — The preparation of financial statements in accordance with GAAP requires us to make estimates and assumptions that affect the amounts reported in the accompanying Consolidated Financial Statements and these Notes and related disclosures. These estimates and assumptions are based on experience and other information available prior to issuance of the accompanying Consolidated Financial Statements and these Notes. Materially different results can occur as circumstances change and additional information becomes known.

Reclassifications — The classification of certain prior year amounts have been adjusted in our Consolidated Financial Statements and these Notes to conform to current year classifications.

Business Realignment — Effective in first quarter 2025, to better align our businesses, we transferred our FOS business from our IMS segment to our AR segment and adjusted our reporting accordingly. The historical results, discussion and presentation of our business segments as set forth in the accompanying Consolidated Financial Statements and these Notes reflect the impact of these changes for all periods presented in order to present segment information on a comparable basis. There is no impact on our previously reported consolidated statements of operations, balance sheets, statements of cash flows or statements of equity resulting from these changes.

Cash and Cash Equivalents — Cash and cash equivalents include cash at banks and temporary cash investments with a maturity of three or fewer months when purchased. These investments include accrued interest and are carried at the lower of cost or market.

Fair Value Measurements — We measure certain assets and liabilities at fair value on a recurring basis utilizing a three-level fair value hierarchy that prioritizes inputs based on market observability:

• Level 1 — Quoted prices in active markets for identical assets or liabilities.

• Level 2 — Observable inputs other than quoted prices included within Level 1, including: quoted prices for similar assets or liabilities in active or inactive markets; quoted prices for identical assets or liabilities in inactive markets; and inputs derived from or corroborated by observable market data.

• Level 3 — Unobservable inputs with little or no market activity that are significant to the fair value of the assets or liabilities and reflect our assumptions about market participants’ pricing, using the best available information.

We utilize observable inputs whenever available. In certain instances, fair value is estimated using quoted market prices from external pricing services. We assess the methodologies of these services to ensure valuations reflect fair value, including net asset value (“NAV”). The NAV reported by an asset manager may be adjusted when sufficient evidence indicates NAV is not representative of fair value.

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Fair Value of Businesses. For purposes of allocating goodwill to the disposal groups that represent a portion of a reporting unit, we determine the fair value of each disposal group based on the respective negotiated selling price, and the fair value of the retained businesses of the respective reporting unit based on a combination of market-based and income-based valuation techniques, utilizing quoted market prices and projected discounted cash flows. These fair value determinations are categorized as Level 3 in the fair value hierarchy due to their use of internal projections and unobservable measurement inputs. See Note 6: Goodwill and Intangible Assets in these Notes for additional information regarding the impairment of goodwill related to our business divestitures.

Accounts Receivable — We record receivables derived from contracts with customers at net realizable value and they generally do not bear interest. This value includes an allowance for estimated uncollectible accounts to reflect any losses anticipated on the accounts receivable balances which is charged to the provision for doubtful accounts. We calculate this allowance at inception based on expected loss over the life of the receivable. We consider historical write-offs by customer, level of past due accounts and economic status of the customer. A receivable is considered delinquent if it is unpaid after the term of the related invoice has expired. Write-offs are recorded at the time a customer receivable is deemed uncollectible. Our allowances for collection losses were $21 million as of both January 2, 2026 and January 3, 2025.

Contract Assets and Liabilities — The timing of revenue recognition, customer billings and cash collections results in contract assets and contract liabilities at the end of each reporting period. Contract assets mainly represent unbilled amounts typically resulting from revenue recognized exceeding amounts billed to customers for contracts utilizing the POC cost-to-cost revenue recognition method. Contract assets become receivables as we bill customers as work progresses in accordance with agreed-upon contractual terms, either at periodic intervals, upon achievement of contractual milestones or upon deliveries and, in certain arrangements, the customer may defer payment of a portion of the contract price until contract completion. Contract assets are classified as current on our Consolidated Balance Sheet based on our contract operating cycle. Contract liabilities include advance payments and billings in excess of revenue recognized, including deferred revenue. Contract assets and liabilities are reported on a contract-by-contract basis at the end of each reporting period.

Contract assets related to amounts withheld by customers until contract completion are not considered a significant financing component of our contracts because the intent is to protect the customers from our failure to satisfactorily complete our performance obligations. Payments received from customers in advance of revenue recognition are not considered a significant financing component of our contracts because they are utilized to pay for contract costs within a one-year period or are requested by us to ensure the customers meet their payment obligations.

Inventories — Inventories are valued at the lower of cost (determined by average and first-in, first-out methods) or net realizable value. We regularly review inventory quantities on hand and record a provision for excess and obsolete inventory primarily based on our estimated forecast of product demand, anticipated end of product life and production requirements.

Property, Plant and Equipment — Property, plant and equipment, including software capitalized for internal use, is recorded at cost and depreciated on a reasonable and systematic basis, typically the straight-line method, over the estimated useful life of the asset. Estimated useful lives generally range as follows: buildings, including leasehold improvements, between 2 and 45 years; machinery and equipment between 2 and 10 years; and software capitalized for internal-use between 2 and 10 years. We review property, plant and equipment for impairment whenever events or changes in circumstances indicate the carrying amount may not be recoverable.

Goodwill — We follow the acquisition method of accounting to record the assets and liabilities of acquired businesses at their estimated fair value at the date of acquisition. We initially record goodwill for the amount of consideration transferred that exceeds the acquisition-date fair value of net identifiable assets acquired.

We test goodwill for impairment at a level within the Company referred to as the reporting unit, which is our business segment level or one level below the business segment. Goodwill is tested for impairment annually as of the first business day of our fourth fiscal quarter, or under certain circumstances more frequently, such as when events or circumstances indicate there may be impairment. Such events or circumstances may include a significant deterioration in overall economic conditions, changes in the business climate of our industry, a decline in our market capitalization, operating performance indicators, competition, reorganizations of our business or the disposal of all or a portion of a reporting unit.

To test goodwill for impairment, we may perform both qualitative and quantitative assessments. If we elect to perform a qualitative assessment for a certain reporting unit, we evaluate events and circumstances impacting the reporting unit to determine the probability that goodwill is impaired. If we perform a quantitative assessment for a

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certain reporting unit, we calculate the fair value of that reporting unit and compare the fair value to the reporting unit’s net book value. We estimate fair values of our reporting units based on projected cash flows, and sales and/or earnings multiples applied to the latest twelve months’ sales and earnings of our reporting units. Projected cash flows are based on our best estimate of future revenues, operating costs and balance sheet metrics reflecting our view of the financial and market conditions of the underlying business; and the resulting cash flows are discounted using an appropriate discount rate that reflects the risk in the forecasted cash flows. Revenue and earnings multiples are based on current multiples of revenues and earnings for similar businesses, and based on revenue and earnings multiples paid for recent acquisitions of similar businesses made in the marketplace. We then assess whether any implied control premium, based on a comparison of fair value based purely on our stock price and outstanding shares with fair value determined by using all of the above-described models, is reasonable.

If we determine it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount, we measure any impairment loss by comparing the fair value of that reporting unit to its carrying amount, including goodwill. If the carrying amount of a reporting unit exceeds its fair value, goodwill is considered impaired, and an impairment loss is recognized in an amount equal to that excess.

Intangible Assets — Our finite-lived intangible assets are amortized to expense over their applicable useful lives, either according to the underlying economic benefit as reflected by future net cash inflows or on a straight-line basis depending on the nature of the asset, generally ranging between 3 to 20 years. We review finite-lived intangible assets for impairment whenever events or changes in circumstances indicate the carrying amount of the asset may not be recoverable. We evaluate the recoverability of such assets based on the expectations of undiscounted cash flows from such assets. If the sum of the expected future undiscounted cash flows is less than the carrying amount of the asset, a loss is recognized for the difference between the fair value and the carrying amount.

Our most significant finite-lived intangible asset is customer relationships that are established through written customer contracts (i.e., revenue arrangements). The fair value for customer relationships is determined, as of the date of acquisition, based on estimates and judgments regarding expectations for the estimated future after-tax earnings and cash flows arising from the follow-on revenues expected from the customer relationships over the estimated lives, including the probability of expected future contract renewals and revenues, less a contributory assets charge, all of which is discounted to present value.

Indefinite-lived intangible assets are tested annually for impairment, or under certain circumstances, more frequently, such as when events or circumstances indicate there may be an impairment. This testing compares the fair value of the asset to its carrying amount, and, when appropriate, the carrying amount of these assets is reduced to its fair value.

Leases — At contract inception, we evaluate whether an arrangement is or contains a lease. Leases with terms of twelve months or less are accounted for under the short-term lease practical expedient and are expensed as incurred in the “Cost of revenue” and “General and administrative expenses” line items in our Consolidated Statement of Operations. For leases with terms greater than twelve months, we determine the lease classification (operating or finance) at the lease commencement date and recognize the related right-of-use (“ROU”) asset and lease liability on our Consolidated Balance Sheet. ROU assets for operating and finance leases are included as a component of the “Other non-current assets” and “Property, plant and equipment, net” line items, respectively. The current portion of the related lease liability is included as a component of the “Other current liabilities” line item, and the non-current portion is included as a component of the “Other non-current liabilities” and “Long-term debt, net of current portion” line items, for operating and finance leases, respectively.

ROU assets and lease liabilities are initially measured at the present value of future lease payments, which primarily consist of base rent. The majority of our leases do not provide an implicit rate that is readily available, therefore the present value of future lease payments is determined using our incremental borrowing rate at the lease commencement date. The expected lease term includes periods covered by options to extend or terminate the lease when it is reasonably certain that such options will be exercised.

Certain lease payments vary based on changes in market indices. These variable lease costs are expensed as incurred and included in the “Cost of revenue” and “General and administrative expenses” line items in our Consolidated Statement of Operations. As a practical expedient, we account for lease and non-lease components as a single lease component. Variable non-lease components are excluded from the measurement of lease payments used to determine the ROU asset and lease liability.

Operating lease cost and finance lease amortization are recognized on a straight-line basis over the expected lease term and included in the “Cost of revenue” and “General and administrative expenses” line items in our

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Consolidated Statement of Operations. Interest expense related to finance lease liabilities is recognized in the “Interest expense, net” line item in our Consolidated Statement of Operations.

Investments — We hold certain investments in companies that align with our strategic business objectives, including advancing capabilities, market access, and technology development. These investments, consisting of equity method investments and equity interest investments, are included as a component of the “Other non-current assets” line item in our Consolidated Balance Sheet. Any impairment charges recognized on our investments are included in the “Non-service FAS pension income and other, net” line item in our Consolidated Statement of Operations.

Equity Method Investments. As of January 2, 2026 and January 3, 2025, our equity method investments were $88 million and $62 million, respectively. Investments where we have significant influence, but not control (typically 20% to 50% ownership), are recorded at cost and adjusted for our share of the investee’s earnings or losses, with dividends received reducing the carrying value of our investment. Adjustments are recognized in the “Non-service FAS pension income and other, net” line item in our Consolidated Statement of Operations. We evaluate these investments for other-than-temporary impairment when events or circumstances indicate the carrying amount may not be recoverable.

Equity Interest Investments. As of January 2, 2026 and January 3, 2025, our equity interest investments were $82 million and $55 million, respectively. These investments are accounted for under ASC 321 and measured at fair value or, when fair value is not readily determinable, under the measurement alternative at cost adjusted for observable price changes or impairment. Changes in fair value and measurement alternative adjustments are recognized in the “Non-service FAS pension income and other, net” line item in our Consolidated Statement of Operations. We evaluate these investments for impairment when indicators of a decline in value arise.

Income Taxes — We follow the asset and liability method of accounting for income taxes. We record deferred tax assets and liabilities for differences between the tax basis of assets and liabilities and amounts reported in our Consolidated Balance Sheet, as well as operating loss and tax credit carryforwards. We follow specific and detailed guidelines in each tax jurisdiction regarding the recoverability of any tax assets recorded on the balance sheet and provide necessary valuation allowances as required. We regularly review our deferred tax assets for recoverability based on historical taxable income, projected future taxable income, the expected timing of the reversals of existing temporary differences and tax planning strategies.

We have elected to account for tax on Global Intangible Low-Taxed Income as a current-period expense when incurred.

Foreign Currency Translation — Assets and liabilities of international subsidiaries that use local currency as the functional currency, are translated at current rates of exchange and income and expense items are translated at the weighted average exchange rate for the year. The resulting translation adjustments are recorded as a component of the “Accumulated other comprehensive income” line item in our Consolidated Balance Sheet.

Share-Based Compensation — We measure compensation cost for all share-based awards (including employee stock options) at fair value and recognize cost over the vesting period, with forfeitures recognized as they occur. It is our practice to issue shares when options are exercised. Share-based compensation expense is recognized in the “Cost of revenue” and “General and administrative expenses” line items in our Consolidated Statement of Operations.

Share Repurchases — Repurchased common shares are permanently retired. As we repurchase our common shares, we reduce common stock for the par value and allocate any excess purchase price over par value to paid-in capital and retained earnings.

Revenue Recognition — We account for a contract when it has approval and commitment from all parties, the rights and payment terms of the parties can be identified, the contract has commercial substance and the collectability of the consideration, or transaction price, is probable. Our contracts are often subsequently modified to include changes in specifications, requirements or price that may create new or change existing enforceable rights and obligations. We do not account for contract modifications (including unexercised options) or follow-on contracts until they meet the requirements noted above to account for a contract.

We categorize revenue and costs for performance obligations to provide tangible goods as “product” and revenue and costs for performance obligations to provide services for which the principal result is not to produce anything tangible as “service.” In instances where a single performance obligation requires us to deliver products and perform services, we derive the product and service categories presented in our financial statements based upon the predominant nature of the performance obligation. In these cases, we classify the revenue and costs from the entire performance obligation based on the nature of the overall promise made to the customer.

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At the inception of each contract, we evaluate the promised products and services to determine whether the contract should be accounted for as having one or more performance obligations. A performance obligation is a promise to transfer a distinct product or service to a customer and represents the unit of accounting for revenue recognition. A substantial majority of our revenue is derived from long-term development and production contracts involving the design, development, manufacture or modification of defense products and related services according to the customers’ specifications. Due to the highly interdependent and interrelated nature of the underlying products and services and the significant service of integration that we provide, which often results in the delivery of multiple units, we account for these contracts as one performance obligation. For contracts that include both development/production and follow-on support services (for example, operations and maintenance), we generally consider the follow-on services distinct in the context of the contract and account for them as separate performance obligations. Additionally, we recognize revenue from contracts to provide multiple distinct products to a customer for which the products can readily be sold to other customers based on their commercial nature and, accordingly, these products are accounted for as separate performance obligations.

Shipping and handling costs incurred after control of a product has transferred to the customer (for example, in free on board shipping arrangements) are treated as fulfillment costs and, therefore, are not accounted for as separate performance obligations. Also, we record taxes collected from customers and remitted to governmental authorities on a net basis such that they are excluded from revenue.

As noted above, our contracts are often subsequently modified to include changes in specifications, requirements or price. Depending on the nature of the modification, we consider whether to account for the modification as an adjustment to the existing contract or as a separate contract. Often, the deliverables in our contract modifications are not distinct from the existing contract due to the significant integration and interrelated tasks provided in the context of the contract. Therefore, such modifications are accounted for as if they are part of the existing contract, and we may be required to recognize a cumulative catch-up adjustment to revenue at the date of the contract modification.

We determine the transaction price for each contract based on our best estimate of the consideration we expect to receive, which includes assumptions regarding variable consideration such as award and incentive fees. These variable amounts are generally awarded upon achievement of certain negotiated performance metrics, program milestones or cost targets and can be based upon customer discretion. We include such estimated amounts in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. We estimate variable consideration primarily using the most likely amount method.

For contracts with multiple performance obligations, we allocate the transaction price to each performance obligation based on the relative standalone selling price of the product or service underlying each performance obligation. The standalone selling price represents the amount for which we would sell the product or service to a customer on a standalone basis (i.e., not sold as a bundle with any other products or services). Our contracts with the U.S. Government, including foreign military sales contracts, are subject to the FAR and the prices of our contract deliverables are typically based on our estimated or actual costs plus appropriate margin. As a result, the standalone selling prices of the products and services in these contracts are typically equal to the selling prices stated in the contract, thereby eliminating the need to allocate (or reallocate) the transaction price to the multiple performance obligations. In our non-U.S. Government contracts, we also generally use the expected cost plus margin approach to determine standalone selling price. In addition, we determine standalone selling price for certain contracts that are commercial in nature based on observable selling prices.

We recognize revenue for each performance obligation when (or as) the performance obligation is satisfied by transferring control of the promised products or services underlying the performance obligation to the customer. The transfer of control can occur over time or at a point in time. A significant portion of our business is derived from development and production contracts. Revenue and profit related to development and production contracts are generally recognized over time, typically using the POC cost-to-cost method of revenue recognition, whereby we measure our progress towards completion of the performance obligation based on the ratio of costs incurred to date to estimated costs at completion under the contract. Because costs incurred represent work performed, we believe this method best depicts the transfer of control of the asset to the customer. Under the POC cost-to-cost method of revenue recognition, a single estimated profit margin is used to recognize profit for each performance obligation over its period of performance. To a lesser extent, we also recognize revenue from contracts to provide multiple distinct products to a customer that are commercial in nature and can readily be sold to other customers. These performance obligations do not meet the criteria listed below to recognize revenue over time; therefore, we recognize revenue at a point in time, generally when the products are received and accepted by the customer.

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Point-in-Time Revenue Recognition. Our performance obligations are satisfied at a point in time unless they meet at least one of the following criteria, in which case they are satisfied over time:

• The customer simultaneously receives and consumes the benefits provided by our performance as we perform;

• Our performance creates or enhances an asset (for example, work in process) that the customer controls as the asset is created or enhanced; or

• Our performance does not create an asset with an alternative use to us and we have an enforceable right to payment for performance completed to date.

Over Time Revenue Recognition. For U.S. Government development and production contracts, there is generally a continuous transfer of control of the asset to the customer as it is being produced based on FAR clauses in the contract that provide the customer with lien rights to work in process and allow the customer to unilaterally terminate the contract for convenience, pay us for costs incurred plus a reasonable profit and take control of any work in process. This also typically applies to our contracts with prime contractors for U.S. Government development and production contracts, when the above-described FAR clauses are flowed down to us by the prime contractors.

Our non-U.S. Government development and production contracts, including international direct commercial contracts and U.S. contracts with state and local agencies, utilities, commercial and transportation organizations, often do not include the FAR clauses described above. However, over time revenue recognition is typically supported either through our performance creating or enhancing an asset that the customer controls as it is created or enhanced or based on other contractual provisions or relevant laws that provide us with an enforceable right to payment for our work performed to date plus a reasonable profit if our customer were permitted to and did terminate the contract for reasons other than our failure to perform as promised.

For performance obligations to provide services that are satisfied over time, we recognize revenue either on a straight-line basis, the POC cost-to-cost method or based on the right-to-invoice method (i.e., based on our right to bill the customer), depending on which method best depicts transfer of control to the customer.

Cost-Type Contracts. Our U.S. Government cost-type contracts provide for the reimbursement of allowable costs plus payment of a fee and fall into three basic types: (i) cost-plus fixed-fee contracts, which provide for payment of a fixed fee irrespective of the final cost of performance; (ii) cost-plus incentive-fee contracts, which provide for payment of a fee that may increase or decrease, within specified limits, based on actual results compared with contractual targets relating to factors such as cost, performance and delivery schedule; and (iii) cost-plus award-fee contracts, which provide for payment of an award fee determined at the customer’s discretion based on our performance against pre-established performance criteria. Under our U.S. Government cost-type contracts, we are reimbursed periodically for allowable costs and are paid a portion of the fee based on contract progress. Some costs are partially or wholly unallowable for reimbursement by statute or regulation. Examples include certain merger and acquisition costs, lobbying costs, charitable contributions, interest expense, financing costs and certain litigation defense costs.

Fixed-Price Contracts. Our U.S. Government fixed-price contracts are either firm fixed-price contracts or fixed-price incentive contracts. Under our U.S. Government firm fixed-price contracts, we agree to perform a specific scope of work or sell a specific product for a fixed price and, as a result, benefit from cost savings or carry the burden of cost overruns. Under our U.S. Government fixed-price incentive contracts, we share with the U.S. Government both savings accrued for performance at less than target cost as well as costs incurred in excess of target cost up to a negotiated ceiling price, which is higher than the target cost, but carry the entire burden of costs exceeding the negotiated ceiling price. Under such incentive contracts, profit may also be adjusted up or down depending on whether specified performance objectives are met. Under our U.S. Government firm fixed-price and fixed-price incentive contracts, we generally receive either milestone payments totaling 100% of the contract price or monthly progress payments in amounts equaling 80% of costs incurred under the contract. The remaining amounts, including profits or incentive fees, are billed upon delivery and final acceptance of end items and deliverables under the contract.

Our production contracts are mainly fixed-price contracts and development contracts are generally cost-type contracts, although we have some fixed-price development contracts. Time-and-material contracts are considered fixed-price contracts as they specify a fixed hourly rate for each labor hour charged.

Contract Estimates. Under the POC cost-to-cost method of revenue recognition, a single estimated profit margin is used to recognize profit for each performance obligation over its period of performance. Recognition of profit on a contract requires estimates of the total cost at completion and transaction price and the measurement of progress

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towards completion. Due to the long-term nature of many of these contracts, developing the estimated total cost at completion and total transaction price often requires judgment. Factors that must be considered in estimating the cost of the work to be completed include the nature and complexity of the work to be performed, subcontractor performance and the risk and impact of delayed performance. Factors that must be considered in estimating the total transaction price include contractual cost or performance incentives (such as incentive fees, award fees and penalties) and other forms of variable consideration, as well as our historical experience and our expectation for performance on the contract.

At the outset of each contract, we gauge its complexity and perceived risks and establish an estimated total cost at completion in line with these expectations. We follow a standard EAC process in which we review the progress and performance on our ongoing contracts. If we successfully retire risks associated with the technical, schedule and cost aspects of a contract, we may lower our estimated total cost at completion commensurate with the retirement of these risks. Conversely, there are many reasons estimated contract costs can increase, including: (i) supply chain disruptions, inflation and labor issues; (ii) design or other development challenges; and (iii) program execution challenges (including from technical schedule or quality issues and other performance concerns). Additionally, as the contract progresses, our estimates of total transaction price may increase or decrease if, for example, we receive incentive or award fees that are higher or lower than expected.

When changes in estimated total costs at completion or in estimated total transaction price are determined, the related impact on operating income is recognized on a cumulative basis. EAC adjustments represent the cumulative effect of the changes from current and prior periods; revenue and operating margins in future periods are recognized as if the revised estimates had been used since contract inception. Any anticipated losses on these contracts are fully recognized in the period in which the losses become evident.

Net EAC adjustments had the following impact to earnings for the periods presented:

			Fiscal Year
(In millions, except per share amounts)			2025						2024						2023
Revenue			$	212					$	210					$	118
Operating income			47						39						(85)
Net income(1)			35						29						(63)
Diluted EPS			0.19						0.15						(0.33)

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(1)Based on a 25 percent federal and state statutory tax rate.

Bill-and-Hold Arrangements. For certain contracts, the finished product may temporarily be stored at our location under a bill-and-hold arrangement. Revenue is recognized on bill-and-hold arrangements at the point in time when the customer obtains control of the product and all of the following criteria have been met: the arrangement is substantive (for example, the customer has requested the arrangement); the product is identified separately as belonging to the customer; the product is ready for physical transfer to the customer; and we do not have the ability to use the product or direct it to another customer. In determining when the customer obtains control of the product, we consider certain indicators, including whether we have a present right to payment from the customer, whether title and/or significant risks and rewards of ownership have transferred to the customer and whether customer acceptance has been received (in the case of arrangements with customer acceptance provisions).

Contractual Backlog. Contractual backlog, which is the equivalent of our remaining performance obligations, represents the future revenue we expect to recognize as we perform on our current contracts. Contractual backlog comprises both funded backlog (i.e., firm orders for which funding is authorized or appropriated) and unfunded backlog (i.e., orders for which funds have not been appropriated and/or incrementally funded). Contractual backlog excludes unexercised contract options and potential orders under ordering-type contracts, such as IDIQ contracts.

As of January 2, 2026, our contractual backlog was $38.7 billion, of which $26.9 billion was funded backlog. We expect to recognize approximately 45% of the revenue associated with such contractual backlog by the end of fiscal 2026 and approximately 70% by the end of fiscal 2027, with the remainder to be recognized thereafter. As of January 3, 2025, our contractual backlog was $34.2 billion, of which $23.3 billion was funded backlog.

Retirement Benefits — The funded or unfunded status of each defined benefit plan is recorded in our Consolidated Balance Sheet. Funded status is derived by subtracting the respective year-end values of the PBO from the fair value of plan assets. Actuarial gains and losses and prior service credits and costs are recorded, net of tax, in the “Accumulated other comprehensive income” line item in our Consolidated Balance Sheet until they are

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amortized as a component of net periodic benefit income in the “Non-service FAS pension income and other, net” line item in our Consolidated Statement of Operations.

The determination of the PBO and the recognition of net periodic benefit income related to defined benefit plans depend on various assumptions, including discount rates, expected return on plan assets, the rate of future compensation increases, mortality, termination and health care cost trend rates. We develop each assumption using relevant Company experience in conjunction with market-related data. Actuarial assumptions are reviewed annually with third-party consultants and adjusted as appropriate. For the recognition of net periodic benefit income, we use a market-related value of plan assets to calculate the expected return on plan assets. The market-related value of plan assets is based on yearly average asset values at the measurement date over the last five years, with investment gains or losses to be phased in over five years. Net actuarial gains and losses are amortized to the net periodic benefit income using the corridor approach, where the net gains and losses in excess of 10% of the greater of the PBO or the market-related value of plan assets are amortized for each plan over the estimated future life expectancy or, if applicable, the average remaining service period of the plan’s active participants. The fair value of plan assets is determined based on market prices or estimated fair value at the measurement date. The measurement date for valuing defined benefit plan assets and obligations is the end of the month closest to our fiscal year end.

Environmental Expenditures — We generally capitalize environmental expenditures that increase the life or efficiency of property or that reduce or prevent environmental contamination. Environmental expenses related to the investigation and remediation of environmental media, including water, soil, soil vapor, air, and structures, as well as associated legal fees, regulatory oversight fees, and other remedial activities, are accrued for existing conditions from past or current operations.

Accruals are recorded on a site-by-site basis when it is probable that a liability has been incurred and the amount can be reasonably estimated based on current law and existing technologies. Relevant factors in estimating potential liabilities include site-specific conditions, incomplete information regarding particular sites and other potentially responsible parties, uncertainty regarding the extent of investigation or remediation, our share of liability, the selection of alternative remedial approaches, changes in environmental standards and regulatory requirements, probable insurance proceeds, cost-sharing agreements with other parties, and potential indemnification from successor or predecessor owners of these sites.

Accruals are reviewed at least annually and updated for progress in investigation and remediation efforts and changes in facts or legal circumstances. When the timing and amount of future cash payments are fixed or reliably determinable, such cash flows are generally discounted in estimating the accrual. Our estimated environmental liabilities are included in the “Other current liabilities” and “Other non-current liabilities” line items in our Consolidated Balance Sheet.

Some environmental costs are eligible for future recovery in the pricing of our products and services to the U.S. Government. When recovery is considered probable under applicable regulations, we record an asset for the recoverable portion of these reserves, included in the “Other current assets” and “Other non-current assets” line items in our Consolidated Balance Sheet.

EPS — EPS is calculated as net income attributable to common shareholders divided by our weighted-average number of basic or diluted common shares outstanding. Potential dilutive common shares primarily consist of employee stock options, RSUs and PSUs.

Business Segments — We evaluate each of our business segments based on its operating income or loss. Intersegment revenues are generally transferred at cost to the buying segment, and the sourcing segment recognizes a profit that is eliminated. The elimination of intersegment revenues is included in the “Intersegment” line item in Note 14: Business Segments in these Notes. Corporate expenses are primarily allocated to our business segments using an allocation methodology prescribed by U.S. Government regulations for government contractors. The “Unallocated corporate items” line item in Note 14: Business Segments in these Notes represents the portion of corporate expenses that are not included in management’s evaluation of segment operating performance or elimination of intersegment profits.

FAS/CAS Operating Adjustment — We calculate and allocate a portion of our defined benefit plan costs to our U.S. Government contracts in accordance with CAS. However, our Consolidated Financial Statements require we calculate our defined benefit plan costs (net periodic benefit income) in accordance with FAS requirements. The difference between CAS pension cost and the service cost component of net periodic benefit income (“FAS pension service cost”) is reflected in the FAS/CAS operating adjustment, which is included as a component of the

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“Unallocated corporate items” item in Note 14: Business Segments in these Notes.

			Fiscal Year
(In millions)			2025						2024						2023
FAS pension service cost			$	(26)					$	(36)					$	(35)
Less: CAS pension cost			(36)						(64)						(145)
FAS/CAS operating adjustment			$	10					$	28					$	110

The non-service cost component of net periodic benefit income is included in the “Non-service FAS pension income and other, net” line item in our Consolidated Statement of Operations. See Note 9: Retirement Benefits in these Notes for additional information regarding our defined benefit plans and composition of net periodic benefit income.

R&D — Company-funded R&D costs are expensed as incurred and are included in the “General and administrative expenses” line item in our Consolidated Statement of Operations. These costs were $536 million, $515 million and $480 million in fiscal 2025, 2024, and 2023, respectively.

Customer-funded R&D costs are incurred pursuant to contractual arrangements, principally U.S. Government-sponsored contracts requiring us to provide a capability meeting certain defined performance or other specifications (such as designs), and such contractual arrangements are accounted for principally by the POC cost-to-cost revenue recognition method. Customer-funded R&D is included in the “Revenue” and “Cost of revenue” line items in our Consolidated Statement of Operations.

Recent Accounting Pronouncements — In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”) which requires disaggregated income tax disclosures on an annual basis, including information on our effective income tax rate reconciliation and income taxes paid. ASU 2023-09 is effective for annual reporting periods beginning after December 15, 2024, and may be applied prospectively or retrospectively. We adopted this standard in fiscal 2025 and applied the provisions prospectively to our income tax disclosures. See Note 7: Income Taxes in these Notes for further information. The adoption of ASU 2023-09 did not have any impact on our operating results, financial position, or cash flows.

In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (“ASU 2024-03”) which requires disclosure, in the notes to financial statements, of specified information about certain costs and expenses included in each expense caption on the face of the income statement at interim and annual reporting periods. ASU 2024-03 is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027, and should be applied either prospectively to financial statements issued for reporting periods after the effective date of this ASU or retrospectively to any or all prior periods presented in the financial statements. We are evaluating the impact of ASU 2024-03 and expect the standard will only impact our disclosures with no material impact on our operating results, financial position, or cash flows.

In September 2025, the FASB issued ASU 2025-06, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software (“ASU 2025-06”), which removes references to prescriptive and sequential development stages, requiring companies to capitalize internal-use software costs when management commits to funding the software project and it is probable the project will be completed. ASU 2025-06 is effective for annual and interim reporting periods beginning after December 15, 2027, and can be applied prospectively, modified prospective, or retrospectively. We are currently evaluating the potential impact of adopting ASU 2025-06 on our operating results, financial position, and cash flows.

In December 2025, the FASB issued ASU 2025-10, Government Grants (Topic 832): Accounting for Government Grants Received by Business Entities (“ASU 2025-10”), to establish guidance on the recognition, measurement, and presentation of government grants received by business entities. ASU 2025-10 is effective for annual and interim reporting periods after December 15, 2028, and can be applied prospectively, modified prospectively, or retrospectively. We are currently evaluating the potential impact of adopting ASU 2025-10 on our operating results, financial position, and cash flows.

In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements (“ASU 2025-11”), to clarify the interim reporting requirements by improving navigability of Topic 270 and more clearly specifying what disclosures are required in an interim reporting period. ASU 2025-11 is effective for interim reporting periods within annual reporting periods beginning after December 15, 2027, and can be applied prospectively or retrospectively to any or all prior periods presented in the condensed consolidated financial

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statements. We are currently evaluating the potential impact of adopting ASU 2025-11 on our operating results, financial position, and cash flows.

NOTE 2: EARNINGS PER SHARE

The weighted-average number of shares outstanding used to compute basic and diluted EPS are as follows:

			Fiscal Year
(In millions)			2025						2024						2023
Basic weighted-average common shares outstanding			187.4						189.8						189.6
Impact of dilutive share-based awards			1.0						0.9						1.0
Diluted weighted-average common shares outstanding			188.4						190.7						190.6

Anti-dilutive share-based awards excluded from diluted EPS were 2.0 million, 3.3 million and 3.7 million in fiscal 2025, 2024 and 2023, respectively.

NOTE 3: CONTRACT ASSETS AND LIABILITIES

Contract assets and liabilities are summarized below:

(In millions)			January 2, 2026						January 3, 2025
Contract assets			$	3,566					$	3,230
Contract liabilities, current			(2,262)						(2,142)
Contract liabilities, non-current(1)			(108)						(91)
Net contract assets			$	1,196					$	997

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(1)Included as a component of the “Other non-current liabilities” line item in our Consolidated Balance Sheet.

Contract assets and liabilities as of January 2, 2026 and January 3, 2025 were primarily impacted by the timing of contractual billing milestones. In fiscal 2025, 2024 and 2023, we recognized revenue of $1,683 million, $1,433 million and $1,247 million, respectively, related to contract liabilities that were outstanding at the end of the respective prior fiscal year.

NOTE 4: INVENTORIES, NET

Inventories, net are summarized below:

(In millions)			January 2, 2026						January 3, 2025
Finished products			$	243					$	211
Work in process			291						332
Materials and supplies			685						787
Inventories, net			$	1,219					$	1,330

NOTE 5: PROPERTY, PLANT AND EQUIPMENT, NET

Property, plant and equipment, net, are summarized below:

(In millions)			January 2, 2026						January 3, 2025
Land			$	140					$	182
Software capitalized for internal use			886						795
Buildings			1,669						1,633
Machinery and equipment			3,171						3,032
Property, plant and equipment			5,866						5,642
Accumulated depreciation and amortization			(3,201)						(2,836)
Property, plant and equipment, net(1)			$	2,665					$	2,806

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(1) In connection with the pending divestiture of the Space Technology disposal group, $115 million of property, plant and equipment, net was reclassified to held for sale in our Consolidated Balance Sheet as of January 2, 2026.

Depreciation and amortization expense related to property, plant and equipment was $453 million, $429 million and $389 million in fiscal 2025, 2024 and 2023, respectively.

NOTE 6: GOODWILL AND INTANGIBLE ASSETS

Goodwill

Changes in the carrying amount of goodwill, by business segment, were as follows:

(In millions)			CS						IMS						SAS						AR						Total
Balance as of December 29, 2023			$	4,940					$	6,564					$	6,110					$	2,365					$	19,979
Goodwill increase from acquisitions(1)			—						—						—						537						537
Goodwill decrease from divestitures(2)			—						—						(79)						(50)						(129)
Impairment of goodwill			—						—						(14)						—						(14)
Currency translation adjustments			(2)						(28)						(18)						—						(48)
Balance as of January 3, 2025 pre-realignment			4,938						6,536						5,999						2,852						20,325
Reallocation of goodwill in business realignment(3)			—						(114)						—						114						—
			4,938						6,422						5,999						2,966						20,325
Assets of business held for sale			—						(120)						—						(165)						(285)
Impairment of goodwill			—						—						—						(85)						(85)
Currency translation adjustments			—						24						31						—						55
Balance as of January 2, 2026			$	4,938					$	6,326					$	6,030					$	2,716					$	20,010

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(1) Goodwill recognized in connection with the Aerojet Rocketdyne Holdings, Inc. (“AJRD”) acquisition. See Note 13: Acquisitions and Divestitures in these Notes for further information.

(2) SAS: Goodwill (net of impairment) derecognized in connection with the Antenna disposal group divestiture. See discussion under “Goodwill Impairments" below. AR: Goodwill derecognized in connection with the AOT disposal group divestiture.

(3) See discussion under “Reallocation of Goodwill in Business Realignments" below.

Accumulated impairment losses are summarized below:

(In millions)			January 2, 2026						January 3, 2025
CS			$	355					$	355
IMS(1)			195						954
SAS			80						80
AR(2)			257						172
Accumulated impairment losses			$	887					$	1,561

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(1) Decrease of $759 million in connection with the CAS disposal group divestiture. See Note 13: Acquisitions and Divestitures in these Notes for further information.

(2) Increase due to $85 million impairment recognized in connection with the Space Technology disposal group pending divestiture. See discussion under “Goodwill Impairments" below.

Reallocation of Goodwill in Business Realignments. To better align our businesses, we adjusted our reporting within our business segments and goodwill reporting units as follows:

Fiscal 2025. We transferred our FOS business from our IMS segment (within the TSS and DE reporting unit) to our AR segment (also a reporting unit) and adjusted our reporting accordingly. In connection with the realignment, goodwill of $114 million, net of accumulated impairment losses of $172 million, was allocated to FOS on a relative fair value basis. Given the economic similarities of FOS and the businesses of our AR reporting unit, all FOS goodwill was absorbed into the existing AR reporting unit. Immediately before and after the realignment, we performed qualitative impairment assessments under our former and new reporting unit structure. These assessments indicated no impairment existed either before or after the realignment.

Fiscal 2024. We realigned our Electro Optical and Maritime sectors in our IMS segment, which are also reporting units, splitting Electro Optical into two sectors, Global Optical Systems and DE, and moving one Electro Optical business to the Maritime sector. Global Optical Systems and DE represent one reporting unit. Immediately before

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and after the realignment, we performed a quantitative impairment assessment under our former and new reporting unit structure. These assessments indicated no impairment existed either before or after the realignment.

Goodwill Impairments. We assess goodwill for impairment annually or under certain circumstances more frequently, such as when events or circumstances indicate there may be impairment.

Fiscal 2025. As further discussed in Note 13: Acquisitions and Divestitures in these Notes, during fourth quarter 2025, we entered into an agreement with a third party to sell a controlling interest in our Space Technology disposal group, a newly established technology company, consisting of our SPPS business, reported in our AR segment (also a reporting unit), and the SA&C business, reported in our IMS segment (within the TSS and DE reporting unit). In connection with the transaction, goodwill of $250 million and $120 million was allocated to the SPPS business and SA&C business, respectively, on a relative fair value basis.

In connection with the preparation of our financial statements for fiscal 2025, we performed quantitative impairment assessments on goodwill assigned to the SPPS business and SA&C business and qualitative impairment assessments on the goodwill assigned to the retained businesses of the AR and TSS and DE reporting units. As a result of these tests, we determined that the fair value of the SPPS business was below its carrying value and accordingly recorded a non-cash charge for impairment of $85 million, which is included in the “Impairment of goodwill and other assets” line item in our Consolidated Statement of Operations. Our assessments for the SA&C business and retained businesses of the AR and TSS and DE reporting units indicated no impairment existed.

Fiscal 2024. On May 31, 2024, we completed the divestiture of Antenna disposal group. As the Antenna disposal group represents the disposal of a portion of the SAS reporting unit, which is also the SAS segment, we assigned $93 million of goodwill to the Antenna disposal group on a relative fair value basis. In connection with the preparation of our financial statements for the quarter and two quarters ended June 28, 2024, we performed a quantitative impairment assessment on goodwill assigned to the Antenna disposal group and a qualitative impairment assessment on the goodwill assigned to the retained businesses of the reporting unit. As a result of these tests, we determined that the fair value of the Antenna disposal group was below its carrying value and accordingly recorded a non-cash charge for impairment of $14 million included in the “Impairment of goodwill and other assets” line item in our Consolidated Statement of Operations.

Fiscal 2023. On November 27, 2023, we entered into a definitive agreement to sell our CAS disposal group, which includes both the CTS and Commercial Aviation reporting units. In connection with the preparation of our financial statements for fiscal 2023, we evaluated the facts and circumstances which impacted the agreed upon selling price of the CAS disposal group and identified interim indicators of impairment within both reporting units subsequent to our annual impairment testing date of October 2, 2023. Specifically, supply chain-related operational challenges which negatively impact cash flows over the short-term forecast period were assessed in combination with our long-term portfolio shaping strategy to dispose of non-core businesses. As a result, we performed quantitative impairment tests for both reporting units as of November 27, 2023, utilizing an income approach aligned to market prices for the two reporting units, as specified in the definitive agreement. As a result of these tests, we determined that the fair value of the CTS reporting unit was above carrying value, while the fair value of the Commercial Avionics reporting unit was below its carrying value, and concluded goodwill related to the Commercial Aviation reporting unit was impaired. Therefore we recorded a non-cash charge for impairment of $296 million associated with the Commercial Aviation reporting unit in the “Impairment of goodwill and other assets” line item in our Consolidated Statement of Operations. For additional information on the CAS disposal group, see Note 13: Acquisitions and Divestitures in these Notes.

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Intangible Assets

Intangible assets, net, are summarized below:

			January 2, 2026																		January 3, 2025
(In millions)			Gross Carrying Amount						Accumulated Amortization						Net Carrying Amount						Gross Carrying Amount						Accumulated Amortization						Net Carrying Amount
Customer relationships(1)			$	8,329					$	(4,031)					$	4,298					$	8,817					$	(3,470)					$	5,347
Developed technologies(1)			849						(544)						305						849						(482)						367
Trade names(1)			175						(75)						100						185						(64)						121
Other			6						(3)						3						3						(2)						1
Total finite-lived intangible assets(2)			9,359						(4,653)						4,706						9,854						(4,018)						5,836
Trade name(1)			1,803						—						1,803						1,803						—						1,803
Intangible assets, net			$	11,162					$	(4,653)					$	6,509					$	11,657					$	(4,018)					$	7,639

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(1)Includes acquisition-related intangibles that benefit the entire Company. As such, these assets and associated amortization are reported at Corporate.

(2)In connection with the pending divestiture of the Space Technology disposal group, $373 million of finite-lived intangibles assets were reclassified to held for sale in our Consolidated Balance Sheet as of January 2, 2026.

Amortization expense for intangible assets was $770 million, $853 million and $779 million in fiscal 2025, 2024 and 2023, respectively. Estimated amortization expense for intangible assets over the next five years and, in total thereafter, are: $632 million in fiscal 2026, $532 million in fiscal 2027, $459 million in fiscal 2028, $403 million in fiscal 2029, $386 million in fiscal 2030, and $2.3 billion thereafter.

NOTE 7: INCOME TAXES

U.S. Federal Tax Reform

On July 4, 2025, the OBBBA was enacted, introducing amendments to the U.S. federal income tax code, including permanent reinstatement of immediate expensing for domestic research expenditures, a reduction in the benefit of the R&D tax credit, restoration of full expensing for qualified machinery, equipment and other short-lived assets, and several modifications to existing international tax provisions. Certain provisions are effective for fiscal 2025 and are recognized in the Consolidated Financial Statements and these Notes. Certain other provisions are effective in future fiscal years.

Income Tax Provision

Our provisions for current and deferred income taxes are as follows:

			Fiscal Year
(In millions)			2025						2024						2023
Current:
United States			$	(10)					$	(166)					$	328
International			77						72						50
State and local			53						5						66
Total current income taxes			120						(89)						444
Deferred:
United States			166						244						(380)
International			(14)						(34)						10
State and local			54						(36)						(51)
Total deferred income taxes			206						174						(421)
Income taxes			$	326					$	85					$	23

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The components of our income before income taxes included in our Consolidated Statement of Operations are as follows:

			Fiscal Year
(In millions)			2025						2024						2023
United States			$	1,677					$	1,406					$	1,016
International			255						191						205
Income before income taxes			$	1,932					$	1,597					$	1,221

A reconciliation of the U.S. statutory income tax rate to our effective income tax rate is as follows:

			Fiscal Year
(In millions)			2025
U.S. federal statutory income tax rate			$	406					21.0		%
State and local income taxes, net of federal income tax effect(1)(2)			70						3.6
Foreign tax effects:
Canada:
Statutory tax rate difference between Canada and U.S.			(11)						(0.6)
Local Provincial Taxes			22						1.1
Other			(3)						(0.2)
Various foreign jurisdictions			3						0.2
Effect of cross-border tax laws:
Foreign-derived intangible income			(35)						(1.8)
Tax credits:
R&D tax credits			(226)						(11.7)
Advanced manufacturing credits			(22)						(1.1)
Other			(2)						(0.1)
Changes in unrecognized tax benefits			20						1.1
Other adjustments:
Impact of divestitures and reorganizations			95						4.9
Other			9						0.5
Effective income tax rate			$	326					16.9		%

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(1)State taxes in Texas, New Jersey and New Hampshire make up the majority (greater than 50 percent) of the tax effect in this category.

(2)Includes the impact of a change in Texas legislation, which required us to record a $32 million valuation allowance against our Texas R&D credit carryforwards.

			Fiscal Year
(In millions)			2024						2023
U.S. statutory income tax rate			21.0		%				21.0		%
State taxes			2.1						1.4
International income			0.4						—
Non-deductible goodwill impairment			—						3.6
R&D tax credit			(10.4)						(12.5)
Foreign-derived intangible income			(2.1)						(4.4)
Changes in valuation allowance			(2.3)						0.2
Impact of divestitures and reorganizations			1.2						(8.5)
Share-based compensation(1)			(0.6)						0.2
Settlement of tax audits			(3.4)						(1.1)
Other items			(0.6)						2.0
Effective income tax rate			5.3		%				1.9		%

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(1)Includes non-deductible share-based compensation and excess tax benefits from share-based compensation.

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As of January 2, 2026, we have outside basis differences in foreign subsidiaries that are considered indefinitely reinvested and are comprised predominantly of purchase accounting adjustments and to a lesser extent, undistributed earnings and other equity adjustments. In the event of a disposition of the foreign subsidiaries or a distribution, we may be subject to incremental U.S. income taxes, subject to an adjustment for foreign tax credits, and withholding taxes or income taxes payable to the foreign jurisdictions. As of January 2, 2026, the determination of the amount of unrecognized deferred tax liability related to the outside basis difference is not practicable.

Deferred Income Tax Assets (Liabilities)

The components of deferred income tax assets (liabilities) were as follows:

(In millions)			January 2, 2026						January 3, 2025
Deferred tax assets, net:
Accruals			$	407					$	396
Tax loss and credit carryforwards(1)			222						249
Operating lease obligation			231						212
Capitalized research and experimental expenditures			1,245						1,694
Other			393						461
Valuation allowance(2)			(260)						(238)
Deferred tax assets, net			2,238						2,774
Deferred tax liabilities:
Property, plant and equipment			(204)						(216)
Acquired intangibles			(1,794)						(1,974)
Operating lease ROU asset			(211)						(188)
Deferred revenue on long-term contracts			(677)						(913)
Pension and other post-employment benefits			(297)						(196)
Other			(93)						(109)
Deferred tax liabilities			(3,276)						(3,596)
Net deferred tax liabilities			$	(1,038)					$	(822)

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(1)As of January 2, 2026, primarily includes credit carryforwards of $189 million and operating loss carryforwards of $37 million which have expiration dates ranging from less than one year to no expiration date. A significant portion of the carryforwards are either indefinite or begin expiring in 2035.

(2)Valuation allowance established to offset certain domestic and foreign deferred tax assets due to the uncertainty regarding our ability to realize these assets in the future. The net change in our valuation allowance in fiscal 2025 and 2024 was an increase of $22 million and a decrease of $2 million, respectively.

Net deferred tax assets (liabilities) were classified as follows in our Consolidated Balance Sheet:

(In millions)			January 2, 2026						January 3, 2025
Deferred income tax assets			$	76					$	120
Deferred income tax liabilities			(1,114)						(942)
Net deferred tax liabilities			$	(1,038)					$	(822)

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Income Taxes Paid

A reconciliation of income taxes paid, net of refunds received, is as follows:

			Fiscal Year
(In millions)			2025
Payment / (refund):
U.S federal(1)			$	(164)
Texas			5
California			5
New Hampshire			5
Massachusetts			5
Florida			5
Other			10
Total U.S. state and local			35
Canada			57
Italy			4
United Kingdom			3
Other			10
Total foreign			74
Total income taxes paid, net of refunds received			$	(55)

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(1)In fiscal 2025, we received $355 million in refunds associated with amended returns and carryback claims, partially offset by payments of $191 million for the purchase of transferable tax credits.

We paid $102 million and $715 million in income taxes, net of refunds received, in fiscal 2024 and 2023, respectively.

Tax Uncertainties

A reconciliation of the beginning and ending amounts of unrecognized tax benefits is as follows:

			Fiscal Year
(In millions)			2025						2024						2023
Balance at beginning of fiscal year			$	758					$	652					$	613
Additions based on:
Tax positions taken during current period			88						120						99
Tax positions taken during prior period			21						23						8
Tax positions related to acquired entities			—						92						86
Reductions based on:
Tax positions taken during prior period			(96)						(113)						(133)
Lapse in statutes of limitations			(4)						(9)						(11)
Settlements with tax authorities			(13)						(7)						(10)
Balance at end of fiscal year(1)			$	754					$	758					$	652

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(1)Includes unrecognized tax benefits that would favorably impact our future tax rates in the event that the tax benefits are eventually recognized of $635 million and $666 million as of January 2, 2026 and January 3, 2025, respectively.

We recognized $19 million, $29 million and $20 million in accrued interest and penalties related to unrecognized tax benefits in our income tax provision in fiscal 2025, 2024 and 2023, respectively. Accrued interest and penalties related to unrecognized tax benefits was $128 million and $109 million as of January 2, 2026 and January 3, 2025, respectively. Unrecognized tax benefits, together with the related accrued interest and penalties, are presented within the “Other non-current liabilities” line item in our Consolidated Balance Sheet.

We file numerous separate and consolidated income tax returns and, where appropriate, those of our subsidiaries and affiliates, in the U.S. federal jurisdiction and various state, local and foreign jurisdictions. Pursuant

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to the Compliance Assurance Process, the Internal Revenue Service (“IRS”) is examining our federal tax returns for fiscal 2021, 2022, 2023, and 2024. Legacy L3’s federal tax returns for calendar years 2017 and 2018 are currently under IRS examination and refund claims related to calendar years 2012, 2013, 2015 and 2016 have been filed with the IRS. In addition, legacy AJRD refund claims related to calendar year 2019, 2020 and 2021 have been filed with the IRS.

NOTE 8: DEBT AND CREDIT ARRANGEMENTS

Long-Term Debt

Long-term debt is summarized below:

(In millions)			January 2, 2026						January 3, 2025
Fixed-rate debt:(1)
3.832% notes, due April 2025(“3.832% 2025 Notes”)(2)(3)			$	—					$	600
7.00% debentures, due January 2026(4)			100						100
3.85% notes, due December 2026(2)			550						550
5.40% notes, due January 2027(2)(3)(5)			1,250						1,250
6.35% debentures, due February 2028(2)			26						26
4.40% notes, due June 2028(2)(3)			1,850						1,850
5.05% notes, due June 2029 (“5.05% 2029 Notes”)(2)(3)(6)			750						750
2.90% notes, due December 2029(2)			400						400
1.80% notes, due January 2031(2)(3)			650						650
5.25% notes, due June 2031 (“5.25% 2031 Notes”)(2)(3)(6)			750						750
5.40% notes, due July 2033(2)(3)(5)			1,500						1,500
5.35% notes, due June 2034 (“5.35% 2034 Notes”)(2)(3)(6)			750						750
4.854% notes, due April 2035(2)(3)			400						400
6.15% notes, due December 2040(2)(3)			300						300
5.054% notes, due April 2045(2)(3)			500						500
5.60% notes, due July 2053(2)(3)(5)			500						500
5.50% notes, due August 2054 (“5.50% 2054 Notes”)(2)(3)			600						600
Fixed-rate debt			10,876						11,476
Finance lease obligations and other			283						288
Unamortized discounts and issuance costs, net of bond premium			(43)						(43)
Total long-term debt			11,116						11,721
Less: current portion(7)			673						640
Long-term debt, net of current portion			$	10,443					$	11,081

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(1)All fixed-rate notes and debentures rank equally in right of payment.

(2)We may redeem these notes, in whole or in part, at our option, at a pre-determined redemption price pursuant to their terms prior to the applicable maturity date.

(3)Upon change of control combined with a below-investment-grade rating event, we may be required to make an offer to repurchase these notes at a pre-determined price pursuant to their terms.

(4)The debentures are not redeemable prior to maturity.

(5)Collectively, the “AJRD Notes”. The AJRD Notes were used to fund a portion of the purchase price for the AJRD acquisition, and to pay related fees and expenses.

(6)Collectively, the “March Issued 2024 Notes”.

(7)Included in the “Other current liabilities” line item in our Consolidated Balance Sheet.

The maturities of long-term debt, including the current portion of long-term debt and excluding finance lease obligations, for the five years following the end of fiscal 2025 and, in total thereafter, are: $660 million in fiscal 2026; $1,256 million in fiscal 2027; $1,880 million in fiscal 2028; $1,155 million in fiscal 2029; $5 million in fiscal 2030; and $5,973 million thereafter.

Long-Term Debt Issuances. On March 13, 2024, we closed the issuance and sale of the March Issued 2024 Notes. The March Issued 2024 Notes were used to repay the entire outstanding $2.25 billion, three-year senior unsecured credit facility (“Term Loan 2025”), including related fees and expenses, which had an outstanding

_____________________________________________________________________59

balance of $2.25 billion as of January 3, 2025. Interest on the March Issued 2024 Notes is payable semi-annually in arrears on June 1 and December 1 of each year.

On August 2, 2024, we closed the issuance and sale of $600 million 5.50% 2054 Notes, and used the net proceeds to repay borrowings under our CP Program. Interest on the 5.50% 2054 Notes is payable semi-annually in arrears on February 15 and August 15 of each year, commencing on February 15, 2025.

Long-Term Debt Repayments.

Fiscal 2025. On April 27, 2025, we repaid the entire outstanding $600 million 3.832% 2025 Notes with proceeds from the 5.50% 2054 Notes issued in fiscal 2024.

Fiscal 2024. On March 14, 2024, we repaid the entire outstanding $2.25 billion drawn on Term Loan 2025, which at time of repayment had a variable interest rate of 6.7%, with proceeds from the issuance of the March Issued 2024 Notes, which bear fixed interest rates between 5.05% and 5.35%. Additionally, during the quarter ended June 28, 2024, we repaid the $350 million aggregate principal amount of our 3.95% notes due May 28, 2024.

Commercial Paper Program

Under our CP Program, we may issue unsecured commercial paper notes up to a maximum aggregate amount of $3.0 billion. The CP Program is supported by amounts available under our credit agreements, discussed below.

The commercial paper notes are sold at par less a discount representing an interest factor or, if interest bearing, at par, and the maturities vary but may not exceed 397 days from the date of issue. The commercial paper notes will rank at least pari passu with all other unsecured and unsubordinated indebtedness.

As of January 2, 2026, we had no outstanding notes under our CP Program. As of January 3, 2025, we had $515 million in outstanding notes under our CP Program, which had a weighted-average interest rate of 4.70%. These outstanding notes are included as a component of the “Short-term debt” line item in our Consolidated Balance Sheet.

Fair Value of Debt

As of January 2, 2026 and January 3, 2025, the estimated fair value of long-term debt was $11.2 billion and $11.5 billion, respectively. These values were estimated using a market approach based on quoted market prices for our debt in the secondary market and would be classified as Level 2 in the fair value hierarchy.

Credit Agreements

2025 Five-Year Credit Facility. On February 18, 2025, we established a new $2.5 billion, five-year senior unsecured revolving credit facility by entering into the 2025 Five-Year Credit Agreement maturing on February 18, 2030 with a syndicate of lenders. The 2025 Five-Year Credit Facility replaces the prior $2.0 billion, five-year senior unsecured revolving credit facility established under the 2022 Credit Agreement, and provides for revolving loans, swingline loans and letters of credit, with a sub-limit of $200 million for swingline loans and a sub-limit of $350 million for letters of credit, with the option to request an increase of the maximum amount of commitments up to $3.5 billion*.*

At our election, borrowings in U.S. Dollars under the 2025 Five-Year Credit Agreement will bear interest at the sum of the secured overnight funding rate (“SOFR”) or the Base Rate (as defined in the 2025 Five-Year Credit Agreement), plus an applicable margin that varies based on the ratings of our senior unsecured long-term debt securities (“Senior Debt Ratings”). In addition to interest payable on the principal amount of indebtedness outstanding, we are required to pay a quarterly unused commitment fee and letter of credit fees based on our Senior Debt Ratings.

2025 364-Day Credit Facility. On February 18, 2025, we established a new $500 million 364-day senior unsecured revolving credit facility by entering into the 2025 364-Day Credit Agreement maturing no later than February 17, 2026 with a syndicate of lenders. The 2025 364-Day Credit Agreement replaces the prior $1.5 billion 364-day 2024 Credit Agreement, which matured on January 24, 2025.

At our election, borrowings in U.S. Dollars under the 2025 364-Day Credit Agreement, will bear interest at the sum of the applicable SOFR or the Base Rate (as defined in the 2025 364-Day Credit Agreement), plus an applicable margin that varies based on our Senior Debt Ratings. In addition to interest payable on the principal amount of indebtedness outstanding, we are required to pay a quarterly unused commitment fee that varies based on our Senior Debt Ratings.

Both the 2025 Five-Year Credit Agreement and the 2025 364-Day Credit Agreement contain customary representations, warranties, covenants and events of default for investment grade borrowers and financings of this type.

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2024 Credit Agreement. On January 26, 2024, we established a new $1.5 billion, 364-day senior unsecured revolving credit facility by entering into a 364-day credit agreement maturing no later than January 24, 2025 with a syndicate of lenders. The 2024 Credit Agreement, which matured on January 24, 2025, replaced the 2023 Credit Agreement.

At our election, borrowings under the 2024 Credit Agreement, which were designated in U.S. Dollars, bore interest at the sum of the term SOFR or the Base Rate (as defined in the 2024 Credit Agreement), plus an applicable margin that varied based on the ratings of our senior unsecured long-term debt securities (“Senior Debt Ratings”). In addition to interest payable on the principal amount of indebtedness outstanding, we were required to pay a quarterly unused commitment fee that varied based on our Senior Debt Ratings.

The 2024 Credit Agreement contained customary representations, warranties, covenants and events of default for investment grade borrowers and financings of this type.

As of January 2, 2026, we had no outstanding borrowings under our credit facilities, had available borrowing capacity of $3.0 billion, and were in compliance with all covenants under the 2025 364-Day Credit Agreement and the 2025 Five-Year Credit Agreement.

As of January 3, 2025, we had no outstanding borrowings under our credit facilities, had available borrowing capacity of $2,985 million, net of outstanding notes under our CP Program, and were in compliance with all covenants under the 2024 Credit Agreement and the 2022 Credit Agreement.

Interest Paid

Total interest paid was $604 million, $654 million and $489 million in fiscal 2025, 2024 and 2023, respectively.

NOTE 9: RETIREMENT BENEFITS

Defined Contribution Plans

We sponsor numerous defined contribution savings plans, which allow our eligible employees to contribute a portion of their pre-tax and/or after-tax income in accordance with specified guidelines. The plans include several match contribution formulas which require us to match a percentage of the employee contributions up to certain limits, generally totaling 6.0% of employee eligible pay. Matching contributions, net of forfeitures, charged to expense were $265 million, $276 million and $267 million in fiscal 2025, 2024 and 2023, respectively.

Deferred Compensation Plans

We also sponsor certain non-qualified deferred compensation plans which are measured at fair value on a recurring basis in our Consolidated Balance Sheet. Deferred compensation plan assets represent diversified assets held in rabbi trusts, which include marketable equity and fixed income securities (Level 1) and corporate-owned life insurance (”COLI”) contracts measured at NAV. Liabilities represent participant balances in marketable equity securities (Level 1) and common/collective trusts (“CCTs”) and guaranteed investment contracts (“GICs”) measured at NAV based on participant designed investment options.

The following table summarizes our deferred compensation plan assets and liabilities:

			January 2, 2026												January 3, 2025
(In millions)			Total						Level 1						Total						Level 1
Assets
Equity and fixed income securities			$	255					$	255					$	219					$	219
COLI, measured at NAV			38												41
Deferred compensation plan assets(1)			$	293											$	260
Liabilities
Equity securities			$	15					$	15					$	10					$	10
CCTs and GICs, measured at NAV			431												357
Deferred compensation plan liabilities(2)			$	446											$	367

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(1)Included in the “Other current assets” and “Other non-current assets” line items in our Consolidated Balance Sheet.

(2)Included in the “Compensation and benefits” and “Other non-current liabilities” line items in our Consolidated Balance Sheet. Under the plan, participants designate investment options (including stock and fixed-income funds), which serve as the basis for measurement of the notional value of their accounts.

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Defined Benefit Plans

We sponsor various defined benefit pension plans for eligible employees in the U.S., Canada and United Kingdom. Our largest plans are generally closed to new entrants. Benefits for most participants are based on the employee’s years of service and compensation. We fund these plans as required by statutory regulations and through voluntary contributions. Some of our employees also participate in other postretirement defined benefit plans (“Other Benefits”) such as health care and life insurance plans.

Our Consolidated Pension Plan (“CPP”) represents our largest defined benefit plan with 85% of total plan assets and 86% of the PBO as of both January 2, 2026 and January 3, 2025.

Group Annuity Purchases. In execution of our pension risk management strategy, we completed the following group annuity purchase transactions in fiscal 2025 and 2024:

Fiscal 2025. On March 14, 2025, we executed nonparticipating single premium group annuity contracts to transfer $1.2 billion of our CPP benefit obligation, covering approximately 22,000 U.S. retirees and beneficiaries, to an insurance provider. The contracts were funded with $1.2 billion of existing CPP plan assets and did not require any additional cash contributions. This transaction had no impact on the amount, timing or form of the monthly retirement benefit payments to the transferred retirees and beneficiaries. As a result of the transaction, we recognized a pre-tax settlement gain of $14 million, reflecting the pro-rata share of unrealized actuarial gains residing in accumulated other comprehensive income as of the annuity purchase date related to the transferred benefit obligation. This gain is included in the “Non-service FAS pension income and other, net” line item in our Consolidated Statement of Operations.

In connection with the annuity purchases, we performed a remeasurement of the CPP plan benefit obligation and plan assets as of February 28, 2025, the end of the month closest to the annuity purchase date. As a result, we recorded a net actuarial loss of $54 million, reflecting a loss of $148 million associated with the decrease in discount rate from 5.49% at January 3, 2025 to 5.22% at February 28, 2025, partially offset by a gain of $94 million from actual return on plan assets more favorable than expected. The net actuarial loss, net of tax, is included in the “Accumulated other comprehensive income” line item in our Condensed Consolidated Balance Sheet.

On October 28, 2025, we executed nonparticipating single premium group annuity contracts to transfer $155 million of our benefit obligation, covering approximately 1,500 Canadian retirees and beneficiaries, to an insurance provider covered under certain of our Canadian pension plans. The contracts were funded with $155 million of existing Canadian pension plan assets and did not require any additional cash contributions. This transaction had no impact on the amount, timing or form of the monthly retirement benefit payments to the transferred retirees and beneficiaries. As a result of the transaction, we recognized a pre-tax settlement gain of $48 million, reflecting the pro-rata share of unrealized actuarial gains residing in accumulated other comprehensive income as of the annuity purchase date related to the transferred benefit obligation. This gain is included in the “Non-service FAS pension income and other, net” line item in our Condensed Consolidated Statement of Operations.

In connection with the annuity purchases, we performed a remeasurement of the impacted plans benefit obligation and plan assets as of October 31, 2025, the end of the month closest to the annuity purchase date. As a result, we recorded actuarial gains of $23 million associated with an increase in discount rate and actual return on plan assets more favorable than expected. The actuarial gain, net of tax, is included in the “Accumulated other comprehensive income” line item in our Consolidated Balance Sheet as of January 2, 2026.

Fiscal 2024. In fiscal 2024, we executed nonparticipating single premium group annuity contracts to transfer $333 million of our CPP benefit obligation to the insurance provider. The contracts were funded with $333 million of existing CPP plan assets. There was no gain or loss as a result of this transaction.

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Funded Status. The following table summarizes the funded status of our defined benefit plans:

			January 2, 2026																		January 3, 2025
(In millions)			Pension						Other Benefits						Total						Pension						Other Benefits						Total
Change in benefit obligation
PBO at beginning of fiscal year			$	7,595					$	215					$	7,810					$	8,563					$	231					$	8,794
Service cost			25						1						26						34						2						36
Interest cost			317						11						328						394						10						404
Actuarial loss (gain)(1)			104						(7)						97						(374)						(4)						(378)
Benefits paid(2)			(506)						(19)						(525)						(967)						(22)						(989)
Settlement			(1,336)						—						(1,336)						—						—						—
Expenses paid			(14)						—						(14)						(19)						—						(19)
Currency translation adjustment			13						1						14						(24)						(1)						(25)
Divestiture			(47)						—						(47)						—						—						—
Other			6						—						6						(12)						(1)						(13)
PBO at end of fiscal year			$	6,157					$	202					$	6,359					$	7,595					$	215					$	7,810
Change in plan assets
Plan assets at beginning of fiscal year			$	8,325					$	274					$	8,599					$	8,595					$	265					$	8,860
Actual return on plan assets			766						29						795						700						22						722
Employer contributions			38						7						45						45						9						54
Benefits paid(2)			(506)						(19)						(525)						(967)						(22)						(989)
Settlement			(1,336)						—						(1,336)						—						—						—
Expenses paid			(14)						—						(14)						(19)						—						(19)
Currency translation adjustment			19						—						19						(31)						—						(31)
Divestiture			(59)						—						(59)						—						—						—
Other			1						1						2						2						—						2
Plan assets at end of fiscal year			$	7,234					$	292					$	7,526					$	8,325					$	274					$	8,599
Funded status at end of fiscal year			$	1,077					$	90					$	1,167					$	730					$	59					$	789

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(1)Actuarial losses impacting the PBO as of January 2, 2026 primarily reflect lower discount rates, whereas actuarial gains impacting the PBO as of January 3, 2025 primarily reflect higher discount rates.

(2)Fiscal 2024 includes $333 million associated with the purchase of group annuity policies and transfer of plan assets to an insurance company. The transaction is reflected in this caption as settlement accounting had not been met.

The following table summarizes amounts recognized in our Consolidated Balance Sheet:

			January 2, 2026																		January 3, 2025
(In millions)			Pension						Other Benefits						Total						Pension						Other Benefits						Total
Other non-current assets			$	1,226					$	142					$	1,368					$	873					$	113					$	986
Compensation and benefits			(12)						(6)						(18)						(12)						(6)						(18)
Other non-current liabilities			(137)						(46)						(183)						(139)						(48)						(187)

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The following table summarizes pre-tax amounts recognized in the “Accumulated other comprehensive income” line item in our Consolidated Balance Sheet:

			January 2, 2026																		January 3, 2025
(In millions)			Pension						Other Benefits						Total						Pension						Other Benefits						Total
Actuarial gain			$	(273)					$	(89)					$	(362)					$	(245)					$	(86)					$	(331)
Net prior service (credit) cost			(110)						1						(109)						(144)						2						(142)
Total recognized in accumulated other comprehensive income (loss), pre-tax			$	(383)					$	(88)					$	(471)					$	(389)					$	(84)					$	(473)

The following table provides information for our defined benefit plans with PBO in excess of plan assets:

			January 2, 2026												January 3, 2025
(In millions)			Pension						Other Benefits						Pension						Other Benefits
PBO			$	152					$	52					$	154					$	55
Fair value of plan assets			3						—						3						—

Accumulated Benefit Obligation (“ABO”): The ABO for all defined benefit pension plans was $6.1 billion and $7.6 billion as of January 2, 2026 and January 3, 2025, respectively. The following table provides information for our defined benefit plans with ABO in excess of plan assets:

			January 2, 2026												January 3, 2025
(In millions)			Pension						Other Benefits						Pension						Other Benefits
ABO			$	152					N/A						$	153					N/A
Fair value of plan assets			3						N/A						3						N/A

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Net Periodic Benefit Income. We record the service cost component of net periodic benefit income in the “Cost of revenue” and “General and administrative expenses” line items and the non-service cost components in the “Non-service FAS pension income and other, net” line item in our Consolidated Statement of Operations.

The following table provides the components of net periodic benefit income and other amounts recognized in other comprehensive income:

			Fiscal Year
			2025												2024												2023
(In millions)			Pension						Other Benefits						Pension						Other Benefits			Total			Pension						Other Benefits
Net periodic benefit income
Operating
Service cost			$	25					$	1					$	34					$	2					$	33					$	2
Non-operating
Interest cost			317						11						394						10						386						11
Expected return on plan assets			(557)						(21)						(660)						(20)						(633)						(20)
Amortization of net actuarial gains			(5)						(13)						(4)						(17)						(9)						(20)
Amortization of prior service (credits) costs			(27)						1						(26)						1						(26)						1
Effect of settlements			(62)						—						—						—						—						—
Non-service cost net periodic benefit income			(334)						(22)						(296)						(26)						(282)						(28)
Net periodic benefit income			$	(309)					$	(21)					$	(262)					$	(24)					$	(249)					$	(26)
Other changes in plan assets and benefit obligations recognized in other comprehensive income
Net actuarial gain			$	(104)					$	(16)					$	(414)					$	(7)					$	(90)					$	(18)
Prior service cost (credit)			5						—						(14)						—						—						—
Amortization of net actuarial gain			6						13						4						17						9						20
Amortization of prior service credit (cost)			27						(1)						26						(1)						26						(1)
Effect of settlements			62						—						—						—						—						—
Effect of divestiture			11						—						—						—						—						—
Currency translation adjustment			(1)						—						4						—						—						—
Total change recognized in other comprehensive income			6						(4)						(394)						9						(55)						1
Total impact from net periodic benefit income and changes in other comprehensive income			$	(303)					$	(25)					$	(656)					$	(15)					$	(304)					$	(25)

Assumptions. The following table presents the weighted-average assumptions used to determine the benefit obligation:

			January 2, 2026												January 3, 2025
			Pension**(1)**						Other Benefits						Pension						Other Benefits
Discount rate			5.29		%				5.13		%				5.46		%				5.38		%
Rate of future compensation increase			3.01		%				N/A						3.01		%				N/A
Cash balance interest crediting rate			4.50		%				N/A						4.50		%				N/A

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(1)Key assumptions for our Consolidated Pension Plan include a discount rate of 5.30%, cash balance interest crediting rate of 4.50% and a 4.25% interest crediting rate for the frozen pension equity benefit.

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The following table presents the weighted-average assumptions used to determine net periodic benefit income:

			Fiscal Year
			2025												2024												2023
			Pension**(1)**						Other Benefits						Pension						Other Benefits						Pension						Other Benefits
Discount rate to determine service cost			5.30		%				5.43		%				4.92		%				5.00		%				5.18		%				5.26		%
Discount rate to determine interest cost			4.96		%				5.08		%				4.80		%				4.78		%				5.08		%				5.06		%
Expected return on plan assets			7.46		%				7.50		%				7.45		%				7.50		%				7.46		%				7.50		%
Rate of future compensation increase			3.01		%				N/A						3.01		%				N/A						3.01		%				N/A
Cash balance interest crediting rate			4.50		%				N/A						4.50		%				N/A						4.00		%				N/A

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(1)Key assumptions for our Consolidated Pension Plan include expected return on plan assets of 7.50%, which is being maintained at 7.50% for fiscal 2026.

The expected long-term rate of return on plan assets reflects the expected returns for each major asset class in which the plans invest, the weight of each asset class in the strategic allocation, the correlations among asset classes and their expected volatilities. Our expected rate of return on plan assets is estimated by evaluating both historical returns and estimates of future returns. Specifically, the determination of the expected long-term rate of return takes into consideration: (1) the plan’s actual historical annual return on assets over the past 15-, 20- and 25-year time periods, (2) historical broad market returns over long-term timeframes weighted by the plan’s strategic allocation and (3) independent estimates of future long-term asset class returns, weighted by the plan’s strategic allocation. Based on this approach, the long-term expected annual rate of return on assets is estimated at 7.50% for fiscal 2026 for the U.S. defined benefit pension plans. The weighted average long-term expected annual rate of return on assets for all defined benefit pension plans is estimated to be 7.46% for fiscal 2026.

The assumed composite rate of future increases in the per capita healthcare costs (the healthcare trend rate) is 8.91% for fiscal 2026, decreasing ratably to 4.53% by fiscal 2037.

Investment Policy. The investment strategy for managing defined benefit plan assets is to seek an optimal rate of return relative to an appropriate level of risk. We manage substantially all defined benefit plan assets on a commingled basis in a master investment trust. In making these asset allocation decisions, we take into account recent and expected returns and volatility of returns for each asset class, the expected correlation of returns among the different investments, as well as anticipated funding and cash flows. To enhance returns and mitigate risk, we diversify our investments by strategy, asset class, geography and sector and engage a large number of managers to gain broad exposure to the markets.

The following table provides the current strategic target asset allocation ranges by asset category:

			Target Asset Allocation
Equity investments			30		%	—			50%
Fixed income investments			30		%	—			50%
Alternative investments			10		%	—			30%
Cash and cash equivalents			0		%	—			10%

Fair Value of Plan Assets. The following is a description of the valuation techniques and inputs used to measure fair value for major categories of investments as reflected in the table that follows such description:

• Domestic and international equities, which include common and preferred shares, domestic listed and foreign listed equity securities, open-ended and closed-ended mutual funds, real estate investment trusts and exchange traded funds, are generally valued at the closing price reported on the major market exchanges on which the individual securities are traded at the measurement date. Because these assets are traded predominantly on liquid, widely traded public exchanges, equity securities are categorized as Level 1 assets.

• Private equity funds are typically limited partnership investment structures. Private equity funds are valued using a market approach based on NAV calculated by the funds and are not publicly available. Private equity funds generally have liquidity restrictions that extend for ten or more years. As of January 2, 2026 and January 3, 2025, our defined benefit plans had future unfunded commitments totaling $371 million and $539 million, respectively, related to private equity fund investments.

• Real asset funds are typically limited partnership investment structures. Real asset funds are valued using a market approach based on NAV calculated by the funds and are not publicly available. Real asset funds

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generally permit redemption on a quarterly basis with 90 or fewer days-notice. At each of January 2, 2026 and January 3, 2025, our defined benefit plans had no future unfunded commitments related to real asset fund investments.

• Hedge funds, which include equity long/short, event-driven, fixed-income arbitrage and global macro strategies, are typically limited partnership investment structures. Limited partnership interests in hedge funds are valued using a market approach based on NAV calculated by the funds and are not publicly available. Hedge funds generally permit redemption on a quarterly or more frequent basis with 90 or fewer days’ notice. At each of January 2, 2026 and January 3, 2025, our defined benefit plans had no future unfunded commitments related to hedge fund investments.

• Fixed income investments, which include U.S. Government securities, investment and non-investment-grade corporate bonds and securitized bonds, are generally valued using pricing models that use verifiable, observable market data such as interest rates, benchmark yield curves and credit spreads, bids provided by brokers or dealers or quoted prices of securities with similar characteristics. Fixed income investments are generally categorized as Level 2 assets. Fixed income funds valued at the closing price reported on the major market exchanges on which the individual fund is traded are categorized as Level 1 assets.

• Cash and cash equivalents are primarily comprised of short-term money market funds valued at cost, which approximates fair value, or valued at quoted market prices of identical instruments. Cash and cash equivalents currency are categorized as Level 1 assets; cash equivalents, such as money market funds or short-term commingled funds, are categorized as Level 2 assets.

• Certain investments that are valued using the NAV per share (or its equivalent) as a practical expedient are not categorized in the fair value hierarchy and are included in the table to permit reconciliation of the fair value hierarchy to the aggregate defined benefit plan assets.

The following tables provide the fair value of plan assets held by our defined benefit plans by asset category and by fair value hierarchy level:

			January 2, 2026
(In millions)			Total						Level 1						Level 2						Level 3
Asset category
Equities:
Domestic equities			$	852					$	852					$	—					$	—
International equities			979						979						—						—
Real estate investment trusts			167						167						—						—
Fixed income:
Corporate bonds			1,574						—						1,522						52
Government securities			861						—						861						—
Securitized assets			27						—						27						—
Fixed income funds			97						5						92						—
Cash and cash equivalents			202						11						191						—
Other			56						—						—						56
Total			$	4,815					$	2,014					$	2,693					$	108
Investments measured at NAV:
Equity funds			1,171
Fixed income funds			142
Hedge funds			151
Private equity funds			894
Real asset funds			322
Other			2
Total investments measured at NAV			2,682
Receivables, net			29
Total fair value of plan assets			$	7,526

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			January 3, 2025
(In millions)			Total						Level 1						Level 2						Level 3
Asset category
Equities:
Domestic equities			$	1,048					$	1,048					$	—					$	—
International equities			968						968						—						—
Real estate investment trusts			186						186						—						—
Fixed income:
Corporate bonds			1,685						—						1,642						43
Government securities			698						—						698						—
Securitized assets			79						—						79						—
Fixed income funds			132						4						128						—
Cash and cash equivalents			498						14						484						—
Other			53						—						—						53
Total			$	5,347					$	2,220					$	3,031					$	96
Investments measured at NAV:
Equity funds			1,389
Fixed income funds			106
Hedge funds			219
Private equity funds			1,127
Real asset funds			323
Other			2
Total investments measured at NAV			3,166
Receivables, net			86
Total fair value of plan assets			$	8,599

Contributions. Funding requirements under IRS rules are a major consideration in making contributions to our defined benefit plans. With respect to U.S. qualified pension plans, we intend to contribute annually not less than the required minimum funding thresholds.

The Employee Retirement Income Security Act of 1974, as amended by the Pension Protection Act of 2006 and further amended by the Worker, Retiree, and Employer Recovery Act of 2008, the Moving Ahead for Progress in the 21st Century Act (“MAP-21”) and applicable Internal Revenue Code regulations mandate minimum funding thresholds. The Highway and Transportation Funding Act of 2014, the Bipartisan Budget Act of 2015, the American Rescue Plan Act of 2021 and the Infrastructure Investment and Jobs Act further extended the interest rate stabilization provision of MAP-21. In fiscal 2025, we made approximately $23 million of contributions to our U.S. qualified defined benefit pension plans. As a result of prior voluntary contributions, we made no material contributions to our U.S. qualified defined benefit pension plans in fiscal 2024 or 2023. We expect to make contributions of approximately $18 million to these plans during fiscal 2026, and may consider voluntary contributions thereafter.

Estimated Future Benefit Payments. The following table provides the projected timing of payments for benefits earned to date and benefits expected to be earned for future service by current active employees under our defined benefit plans:

(In millions)			Pension						Other Benefits(1)						Total
Fiscal Years:
2026			$	484					$	21					$	505
2027			472						20						492
2028			474						19						493
2029			479						18						497
2030			478						18						496
2031 — 2035			2,295						76						2,371

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(1)Projected payments for Other Benefits reflect net payments from the Company, which include subsidies that reduce the gross payments by less than 1%.

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Multi-employer Benefit Plans

Certain of our businesses participate in multi-employer defined benefit pension plans. We make cash contributions to these plans under the terms of collective-bargaining agreements that cover union employees based on a fixed rate per hour of service worked by the covered employees. The risks of participating in these multi-employer plans are different from single-employer plans in the following aspects: (1) assets contributed to the multi-employer plan by one employer may be used to provide benefits to employees of other participating employers, (2) if a participating employer stops contributing to the plan, the unfunded obligations of the plan may be borne by the remaining participating employers and (3) if we choose to stop participating in some of our multi-employer plans, we may be required to pay those plans an amount based on the underfunded status of the plan, referred to as a withdrawal liability. Cash contributed and expenses recorded for our multi-employer plans were not material in fiscal 2025, 2024 or 2023.

NOTE 10: SHARE-BASED COMPENSATION

As of January 2, 2026, we had stock options and other share-based compensation outstanding under our 2024 Equity Incentive Plan and predecessor plans (collectively, the “L3Harris SIPs”). As part of our long-term incentive compensation program, we have made awards to employees in the form of RSUs, PSUs and non-qualified stock options under the L3Harris SIPs. We have also awarded RSUs in the form of deferred units to our non-employee directors. We believe that share-based awards more closely align the interests of participants with those of shareholders.

Share-based compensation expense was $113 million, $97 million and $89 million for fiscal 2025, 2024 and 2023, respectively. The related tax benefit for share-based compensation expense was $28 million, $20 million, and $19 million for fiscal 2025, 2024, and 2023, respectively.

Share-Based Compensation Awards

As of January 2, 2026, a total of 19.6 million shares of common stock remained available under our L3Harris SIPs for future issuance (excluding shares to be issued in respect of outstanding stock options, with each full-value award (e.g., RSUs and PSUs) counting as 3.8 shares against the total remaining for future issuance). During fiscal 2025, we issued an aggregate of 1.1 million shares of common stock under the terms of our L3Harris SIPs, which is net of shares withheld for tax purposes.

RSUs. RSUs granted under our L3Harris SIPs are not transferable until vested and the restrictions generally lapse upon the achievement of continued employment (or board membership) over a specified time period.

The grant-date fair value of these awards was based on the closing price of our common stock on the grant date and is amortized to compensation expense over the vesting period.

The following table summarizes the activity of RSUs during fiscal 2025:

			Units (In thousands)						Weighted-Average Grant-Date Price Per Unit
RSUs outstanding as of January 3, 2025			582						$	210.28
Granted			249						$	218.06
Vested			(208)						$	221.37
Forfeited			(46)						$	210.14
RSUs outstanding as of January 2, 2026			577						$	211.19

As of January 2, 2026, there was $57 million of total unrecognized compensation expense related to these awards under our L3Harris SIPs. This expense is expected to be recognized over a weighted-average period of 2.19 years. The weighted-average grant-date price per unit was $218.06, $211.95 and $199.33 for awards granted in fiscal 2025, 2024 and 2023, respectively. The total fair value of the awards that vested was $46 million, $46 million and $44 million in fiscal 2025, 2024 and 2023, respectively.

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PSUs. As of January 2, 2026, all outstanding PSUs granted under our L3Harris SIPs are subject to performance criteria, such as meeting predetermined operating income or earnings per share, return on invested capital targets and market conditions, such as total shareholder return, for a three-year performance period. These awards also generally vest after a three-year performance period. The final determination of the number of shares to be issued in respect of an award is made by our Board or a committee thereof.

The grant-date fair value of awards with market conditions was determined based on a multifactor Monte Carlo valuation model that simulates our stock price and TSR relative to other companies in the S&P 500, less a discount to reflect the delay in payments of cash dividend-equivalents that are made only upon vesting. The fair value of these awards is amortized to compensation expense over the performance period if achievement of the performance measures is considered probable.

The following table summarizes the activity of PSUs during fiscal 2025:

			Units (In thousands)						Weighted-Average Grant-Date Price Per Unit
PSUs outstanding as of January 3, 2025			426						$	236.42
Granted			185						$	217.67
Adjustment for achievement of performance measures			9						$	258.83
Vested			(137)						$	258.83
Forfeited			(32)						$	223.83
PSUs outstanding as of January 2, 2026			451						$	223.20

As of January 2, 2026, there was $37 million of total unrecognized compensation expense related to these awards under our L3Harris SIPs. This expense is expected to be recognized over a weighted-average period of 1.71 years. The weighted-average grant-date price per unit was $217.67, $230.09 and $223.09 for awards granted in fiscal 2025, 2024 and 2023, respectively. The total fair value of the awards that vested was $36 million, $37 million and $42 million in fiscal 2025, 2024 and 2023, respectively.

Stock Options. Exercise prices for stock options, including performance stock options, that have been granted under the L3Harris SIPs are equal to or greater than the fair market value of our common stock on the grant date, using the closing stock price of our common stock. Stock options may be exercised for a period of ten years after the date of grant, and stock options, other than performance stock options, generally become exercisable in installments, which are typically 33.3% one year from the grant date, 33.3% two years from the grant date and 33.3% three years from the grant date. In certain instances, vesting and exercisability are also subject to performance criteria.

The grant-date fair value of each stock option award was determined using the Black-Scholes-Merton option-pricing model which used assumptions noted in the following table:

			Fiscal Year
			2025						2024						2023
Expected dividends			2.29%						2.18%						2.17%
Expected volatility			26.52%						25.29%						28.60%
Risk-free interest rates			4.03%						3.80% - 4.64%						3.48% - 4.27%
Expected term (years)			5.00						5.06						5.04

Expected volatility over the expected term of the stock options is based on implied volatility from traded stock options on our common stock and the historical volatility of our stock price. The expected term of the stock options is based on historical observations of our common stock, considering average years to exercise for all stock options exercised and average years to cancellation for all stock options canceled, as well as average years remaining for vested outstanding stock options, which is calculated based on the weighted-average of these three inputs. The risk-free interest rate for periods within the contractual life of the stock option is based on the U.S. Treasury yield curve in effect at the time of grant.

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The following table summarizes the stock option activity during fiscal 2025:

			Shares (In thousands)						Weighted Average Exercise Price Per Share						Weighted Average Remaining Contractual Term (In years)						Aggregate Intrinsic Value (In millions)
Stock options outstanding as of January 3, 2025			2,537						$	191.09
Granted			388						$	206.11
Exercised			(862)						$	169.12
Forfeited or canceled			(82)						$	211.45
Stock options outstanding as of January 2, 2026			1,981						$	202.70					6.16						$	202
Stock options exercisable as of January 2, 2026			1,289						$	199.18					4.87						$	136

The weighted-average grant-date fair value per share was $49.20, $50.99 and $54.63 for stock options granted in fiscal 2025, 2024 and 2023, respectively. The total intrinsic value of stock options at the time of exercise was $82 million, $100 million and $23 million for stock options exercised in fiscal 2025, 2024 and 2023, respectively.

The following table summarizes the unvested stock option activity during fiscal 2025:

			Shares (In thousands)						Weighted-Average Grant-Date Fair Value Per Share
Unvested stock options as of January 3, 2025			635						$	52.54
Granted			388						$	49.20
Vested			(253)						$	52.86
Forfeited			(79)						$	51.58
Unvested stock options as of January 2, 2026			691						$	50.43

As of January 2, 2026, there was $20 million of total unrecognized compensation expense related to unvested stock options granted under our L3Harris SIPs. This expense is expected to be recognized over a weighted-average period of 1.80 years. The total fair value of stock options that vested was $13 million, $14 million and $14 million in fiscal 2025, 2024 and 2023, respectively.

NOTE 11: LEASES

Our operating and finance leases primarily consist of real estate leases for office space, warehouses, manufacturing, R&D facilities, telecommunication tower space and land and equipment leases.

Lease Costs. Components of lease costs included in our Consolidated Statement of Operations are as follows:

			Fiscal Year
(In millions)			2025						2024						2023
Operating lease cost			$	172					$	164					$	163
Other, net(1)			75						75						60
Total lease cost			$	247					$	239					$	223

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(1) Includes short-term and equipment lease costs, variable lease costs, finance lease amortization, interest costs and sublease income.

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Balance Sheet. ROU assets and lease liabilities included in our Consolidated Balance Sheet are as follows:

			January 2, 2026												January 3, 2025
(In millions)			Operating						Finance						Operating						Finance
ROU assets			$	717					$	192					$	684					$	202
Current lease liabilities			132						10						150						32
Non-current lease liabilities			653						221						650						206
Total lease liabilities			$	785					$	231					$	800					$	238

Supplemental Lease Information. Other supplemental lease information is as follows:

			Fiscal Year
(In millions)			2025						2024
Net cash provided by operating activities - operating lease payments			$	178					$	182
ROU assets obtained in exchange for new operating lease obligations			215						96

			Fiscal Year
			2025												2024
			Operating						Finance						Operating						Finance
Weighted average remaining lease term			7.51 years						17.66 years						7.59 years						16.41 years
Weighted average discount rate			4.84		%				4.23		%				3.72		%				4.43		%

Maturities of operating and finance lease liabilities as of January 2, 2026 were as follows:

			January 2, 2026
(In millions)			Operating						Finance
2026			$	174					$	19
2027			153						18
2028			133						19
2029			114						19
2030			95						42
Thereafter			287						193
Total future lease payments			956						310
Less: imputed interest			171						79
Present value of lease liabilities			$	785					$	231

On January 2, 2026, we had additional future payments of $1.1 billion related to leases that have not yet commenced. These leases will commence between 2026 and 2028 and have lease terms of 7 years to 20 years. Of this amount, approximately $700 million pertains to a lease associated with the expansion of our large solid rocket motor production facility in Camden, Arkansas. This lease is expected to commence in January 2028, upon completion of construction, with a lease term of 20 years.

NOTE 12: SHAREHOLDERS' EQUITY

Common Stock

Authorized common stock consists of 500,000,000 shares with a par value of $1 per share, of which 186,844,093 shares and 189,794,911 shares were issued and outstanding as of January 2, 2026 and January 3, 2025, respectively.

Shares Repurchase Program. On January 28, 2021 and October 21, 2022, we announced that our Board approved share repurchase authorizations under our repurchase program of $6.0 billion and $3.0 billion, respectively. The $6.0 billion program was fully utilized during the first quarter 2025. Our repurchase program does not have an expiration date and authorizes us to repurchase shares of our common stock through open market purchases, private transactions, transactions structured through investment banking institutions or any combination thereof.

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During fiscal 2025, we repurchased 5.1 million shares of our common stock under our share repurchase program for $1.2 billion and had remaining unused authorizations of $2.2 billion as of January 2, 2026. During fiscal 2024, we repurchased 2.5 million shares of our common stock under our share repurchase program for $554 million and had of remaining unused authorizations of $3.4 billion as of January 3, 2025.

Preferred Stock

Authorized preferred stock consists of 1,000,000 shares, without par value, of which no shares were issued and outstanding as of January 2, 2026 and January 3, 2025.

Accumulated Other Comprehensive Income (Loss) (“AOCI”)

Changes in the components of AOCI, net of tax were as follows:

(In millions)			Foreign currency translation and other, net**(1)**						Pension and other postretirement benefits**(2)**						Total AOCI
Balance at December 30, 2022			$	(316)					$	28					$	(288)
Other comprehensive income before reclassifications			46						71						117
Losses (gains) reclassified to earnings			4						(31)						(27)
Other comprehensive income			50						40						90
Balance at December 29, 2023			(266)						68						(198)
Other comprehensive (loss) income before reclassifications			(72)						323						251
Losses (gains) reclassified to earnings			7						(33)						(26)
Other comprehensive (loss) income			(65)						290						225
Balance at January 3, 2025			(331)						358						27
Other comprehensive income before reclassifications			77						73						150
Losses (gains) reclassified to earnings			20						(78)						(58)
Other comprehensive income (loss)			97						(5)						92
Balance at January 2, 2026			$	(234)					$	353					$	119

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(1)Other, net consists of hedging derivatives.

(2)See Note 9: Retirement Benefits in these Notes for further information.

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NOTE 13: ACQUISITIONS AND DIVESTITURES

Acquisitions

Acquisition of Viasat’s TDL. On January 3, 2023, we completed the acquisition of TDL. The acquisition enhances our networking capability and provides access to the ubiquitous Link 16 waveform, better positioning us to enable the DoW integrated architecture goal in JADC2, which is reported in our CS segment.

Acquisition of AJRD. On July 28, 2023, we acquired AJRD, a technology-based engineering and manufacturing company that develops and produces missile solutions with technologies for strategic defense, missile defense, and hypersonic and tactical systems, as well as space propulsion and power systems for national security space and exploration missions, which is reported in our AR segment.

Divestitures

Space Technology Disposal Group. During fourth quarter 2025, we entered into an agreement with AE Industrial Partners (“AE Industrial”) to establish a new space technology company. Under the agreement we will contribute certain of the assets and liabilities of the SPPS business, reported in our AR segment, and the SA&C business, reported in our IMS segment to a new entity in which we will retain a 40% noncontrolling interest. The Space Technology disposal group, which excludes our RS-25 rocket engine business, provides premier propulsion, power, space flight avionics and communications systems. Under the agreement, AE Industrial will acquire an approximately 60% controlling interest in the new space technology company, at a net enterprise value of $825 million, subject to regulatory approvals and other customary closing conditions. The transaction is expected to close in the second half of 2026.

Upon closing, we will derecognize the assets and liabilities of the Space Technology disposal group and record an equity method investment at the fair value of our retained noncontrolling interest. Our share of earnings or losses from the equity method investment will be recognized in the “Non-service FAS pension income and other, net” line item in our Consolidated Statement of Operations, with a corresponding adjustment to the carrying value of the investment included in the “Other non-current assets” line item in our Consolidated Balance Sheet.

In connection with the preparation of our financial statements for fiscal 2025, we concluded that the goodwill related to the Space Technology disposal group was impaired and we recorded a non-cash impairment charge of $85 million, which is included in the “Impairment of goodwill and other assets” line item in our Consolidated Statement of Operations for fiscal 2025. See Note 6: Goodwill and Intangible Assets in these Notes for additional information.

The fair value less costs to sell of the Space Technology disposal group was $771 million and we recognized a pre-tax loss of $54 million included in the “General and administrative expenses” line item in our Consolidated Statement of Operations for fiscal 2025.

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The carrying amounts of the assets and liabilities of the Space Technology disposal group classified as held for sale in our Consolidated Balance Sheet were as follows:

(In millions)			January 2, 2026
Receivables, net			$	26
Contract assets			94
Inventories, net			8
Other current assets			11
Property, plant and equipment, net			115
Goodwill			285
Intangible assets, net			373
Other non-current assets			26
Valuation allowance			(54)
Total assets held for sale			$	884
Accounts payable			9
Contract liabilities			59
Compensation and benefits			7
Other current liabilities			19
Other non-current liabilities			19
Total liabilities held for sale			$	113

Income before income taxes was $83 million, $70 million and $41 million for fiscal 2025, 2024 and 2023, respectively. Fiscal 2023 includes only a partial year of the SPPS business following the July 28, 2023 acquisition of AJRD.

CAS Disposal Group. On March 28, 2025, we completed the sale of our CAS disposal group, which provided integrated aircraft avionics, pilot training and data analytics services for the commercial aviation industry, and was reported in our IMS segment through the date of sale. Income before income taxes attributable to L3Harris was $21 million, $121 million and a loss of $208 million for fiscal 2025, 2024 and 2023, respectively. In connection with the CAS disposal group sale, we received cash proceeds, net of cash divested, of $820 million.

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The carrying amounts of assets and liabilities included in the CAS disposal group divestiture were as follows:

(In millions)			March 28, 2025
Receivables, net			$	117
Contract assets			47
Inventories, net			139
Other current assets			22
Property, plant and equipment, net			46
Goodwill			535
Intangible assets, net			263
Other non-current assets			60
Total assets			$	1,229
Accounts payable			95
Contract liabilities			49
Compensation and benefits			6
Other current liabilities			41
Long-term debt, net of current portion			2
Other non-current liabilities			59
Total liabilities			$	252
Net assets divested			$	977

In connection with the divestiture, we derecognized noncontrolling interest and accumulated other comprehensive income of $63 million and $6 million, respectively, and recognized a $28 million pre-tax loss, inclusive of amounts attributable to noncontrolling interest and the final purchase price adjustment. The pre-tax loss, which is included in the “General and administrative expenses” line item in our Consolidated Statement of Operations for fiscal 2025, is incremental to the previously recorded CAS disposal group losses of $29 million and $77 million recognized in fiscal 2024 and 2023, respectively.

AOT Disposal Group. On January 3, 2025, we completed the divestiture of our AOT disposal group, from our AR segment, for cash proceeds of of $103 million.

Antenna Disposal Group**.** On May 31, 2024, we completed the divestiture of our Antenna disposal group, from our SAS segment, for cash proceeds of $170 million and a $25 million note receivable.

Visual Information Solutions (“VIS”). During fiscal 2023, we completed the divestiture of VIS from our SAS segment, for net cash proceeds of $71 million.

NOTE 14: BUSINESS SEGMENTS

We structure our operations primarily around the capabilities we provide and report our financial results in the following four reportable segments:

CS: including software defined communication products and waveforms for domestic and international customers; broadband communications; integrated vision solutions; and public safety radios, system applications and equipment; and

IMS: including multi-mission ISR systems; passive sensing and targeting; electronic attack platforms; autonomy; power and communications; networks; and the CAS disposal group, which includes aviation products and pilot training operations and was divested on March 28, 2025; and

SAS: including satellites and space payloads, sensors and full-mission solutions; classified intelligence and cyber; airborne combat systems; and mission networks for air traffic management operations; and

AR: including missile solutions with propulsion technologies for strategic defense, missile defense, hypersonic, tactical and fuzing systems; and space propulsion and power systems for national security and space exploration missions.

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Chief Operating Decision Maker (“CODM”)

Our Chairman and CEO serves as the CODM and is responsible for evaluating business segment performance and allocating resources across the Company. The CODM reviews periodic financial reporting packages that include segment revenues, operating income, and other key operational and financial metrics, and compares historical, actual, and forecasted information to assess segment performance. Segment information is prepared on a basis consistent with the internal reports provided to the CODM.

Business Segment Financial Information

The following table presents operating results by business segment and a reconciliation to total income before income taxes:

			Fiscal Year
(In millions)			2025						2024						2023
Revenue
CS			$	5,673					$	5,459					$	5,070
IMS			6,630						6,618						6,446
SAS			6,946						6,869						6,856
AR			2,845						2,580						1,243
Intersegment			(229)						(201)						(196)
Total revenue			21,865						21,325						19,419
Cost of revenue
CS			(3,570)						(3,490)						(3,217)
IMS			(5,188)						(5,039)						(4,933)
SAS			(5,463)						(5,430)						(5,380)
AR			(2,207)						(2,008)						(977)
Intersegment and corporate			188						166						201
Total cost of revenue			(16,240)						(15,801)						(14,306)
Operating income
CS			1,432						1,324						1,229
IMS			812						826						443
SAS			852						812						756
AR			270						307						138
Segment operating income			3,366						3,269						2,566
Unallocated corporate items			(1,256)						(1,351)						(1,140)
Total operating income			2,110						1,918						1,426
Non-service FAS pension income and other, net			419						354						338
Interest expense, net			(597)						(675)						(543)
Income before income taxes			$	1,932					$	1,597					$	1,221

Unallocated Corporate Items. Unallocated corporate items include income and expenses not included in management’s evaluation of segment operating performance, such as amortization of acquisition-related intangibles; merger, acquisition, and divestiture-related expenses; additional cost of revenue related to the fair value step-up in inventory sold; business divestiture-related losses, net; certain impairment of other assets; and LHX NeXt implementation costs. Additionally, unallocated corporate items include a portion of management and administration, legal, environmental, compensation, retiree benefits, the FAS/CAS operating adjustment, eliminations and other.

LHX NeXt Initiative. LHX NeXt is our initiative to transform multiple functions, systems and processes to increase agility and competitiveness. The LHX NeXt effort includes non-recurring costs for workforce optimization, incremental IT expenses for implementation of new systems, third party consulting and other costs. We completed the LHX NeXt initiative in fiscal 2025.

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Disaggregation of Revenue

We disaggregate revenue for all four business segments by customer relationship, contract type and geographical region. We believe these categories best depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors.

			Fiscal 2025
(In millions)			CS						IMS						SAS						AR
Revenue By Customer Relationship
Prime contractor			$	4,287					$	4,598					$	4,307					$	650
Subcontractor			1,324						1,957						2,575						2,167
Intersegment			62						75						64						28
Total segment			$	5,673					$	6,630					$	6,946					$	2,845
Revenue By Contract Type
Fixed-price			$	4,825					$	5,050					$	4,619					$	1,850
Cost-type			786						1,505						2,263						967
Intersegment			62						75						64						28
Total segment			$	5,673					$	6,630					$	6,946					$	2,845
Revenue By Geographical Region
United States			$	3,609					$	4,852					$	6,045					$	2,545
International(1)			2,002						1,703						837						272
Intersegment			62						75						64						28
Total segment			$	5,673					$	6,630					$	6,946					$	2,845

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(1) Includes revenue where the end consumer is located outside the U.S., including foreign military sales funded through the U.S. Government, whether directly or through prime contractors. No individual foreign country represents more than 5% of our total revenue.

			Fiscal 2024
(In millions)			CS						IMS						SAS						AR
Revenue By Customer Relationship
Prime contractor			$	3,801					$	4,279					$	4,307					$	664
Subcontractor			1,589						2,286						2,511						1,888
Intersegment			69						53						51						28
Total segment			$	5,459					$	6,618					$	6,869					$	2,580
Revenue By Contract Type
Fixed-price			$	4,566					$	5,199					$	4,293					$	1,568
Cost-type			824						1,366						2,525						984
Intersegment			69						53						51						28
Total segment			$	5,459					$	6,618					$	6,869					$	2,580
Revenue By Geographical Region
United States			$	3,741					$	4,721					$	5,971					$	2,504
International(1)			1,649						1,844						847						48
Intersegment			69						53						51						28
Total segment			$	5,459					$	6,618					$	6,869					$	2,580

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(1) Includes revenue where the end consumer is located outside the U.S., including foreign military sales funded through the U.S. Government, whether directly or through prime contractors. No individual foreign country represents more than 5% of our total revenue.

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			Fiscal 2023
(In millions)			CS						IMS						SAS						AR
Revenue By Customer Relationship
Prime contractor			$	3,420					$	4,152					$	4,252					$	294
Subcontractor			1,597						2,220						2,555						929
Intersegment			53						74						49						20
Total segment			$	5,070					$	6,446					$	6,856					$	1,243
Revenue By Contract Type
Fixed-price			$	4,289					$	4,869					$	4,257					$	783
Cost-type			728						1,503						2,550						440
Intersegment			53						74						49						20
Total segment			$	5,070					$	6,446					$	6,856					$	1,243
Revenue By Geographical Region
United States			$	3,482					$	4,646					$	5,933					$	1,184
International(1)			1,535						1,726						874						39
Intersegment			53						74						49						20
Total segment			$	5,070					$	6,446					$	6,856					$	1,243

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(1) Includes revenue where the end consumer is located outside the U.S., including foreign military sales funded through the U.S. Government, whether directly or through prime contractors. No individual foreign country represents more than 5% of our total revenue.

Assets

Total assets by business segment were as follows:

(In millions)			January 2, 2026						January 3, 2025
CS			$	7,131					$	7,060
IMS			9,831						10,389
SAS			8,958						8,705
AR			5,109						4,826
Corporate(1)			10,166						11,021
Total assets			$	41,195					$	42,001

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(1)Includes intangible assets acquired in connection with business combinations that benefit the entire Company. See the “Intangible Assets” section in Note 6: Goodwill and Intangible Assets in these Notes for further information.

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Other Financial Information

Other financial information by business segment and geographical operations is summarized below:

			Fiscal Year
(In millions)			2025						2024						2023
Capital Expenditures
CS			$	70					$	50					$	39
IMS			74						115						148
SAS			118						140						151
AR			116						52						32
Corporate			46						51						79
Total capital expenditures			$	424					$	408					$	449
Depreciation and Amortization
CS			$	53					$	56					$	54
IMS			70						63						71
SAS			146						130						115
AR			49						50						31
Corporate			906						990						895
Total depreciation and amortization			$	1,224					$	1,289					$	1,166
Geographical Operations
Long-lived assets
United States			$	2,503					$	2,639					$	2,678
International			162						167						184

The percentage of our revenue that was derived from sales to U.S. Government customers, whether directly or through prime contractors, including foreign military sales funded through the U.S. Government, was 75%, 76% and 76% in fiscal 2025, 2024 and 2023, respectively.

NOTE 15: LEGAL PROCEEDINGS, COMMITMENTS AND CONTINGENCIES

Legal Proceedings

In the ordinary course of business, we are routinely defendants in, parties to or otherwise subject to many pending and threatened legal actions, claims, disputes, arbitrations and other legal proceedings incident to our business, arising from or related to matters, including but not limited to: product liability; personal injury; patents, trademarks, trade secrets or other intellectual property; labor and employment disputes; commercial or contractual disputes; strategic acquisitions or divestitures; the prior sale or use of former products allegedly containing asbestos or other restricted materials; breach of warranty; or environmental matters. Claimed amounts against us may be substantial, but may not bear any reasonable relationship to the merits of the claim or the extent of any real risk of court or arbitral awards. We record accruals for losses related to those matters against us that we consider to be probable and that can be reasonably estimated. Gain contingencies, if any, are recognized when they are realized and legal costs generally are expensed when incurred.

At January 2, 2026, our accrual for the potential resolution of lawsuits, claims or proceedings that we consider probable of being decided unfavorably to us was not material. We cannot at this time estimate the reasonably possible loss or range of loss in excess of our accrual due to the inherent uncertainties and speculative nature of contested proceedings. Although it is not feasible to predict the outcome of these matters with certainty, based on available information, in the opinion of management, settlements, arbitration awards and final judgments, if any, that are considered probable of being rendered against us in litigation or arbitration in existence at January 2, 2026 were reserved against or would not have a material adverse effect on our financial condition, results of operations, cash flows or equity.

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Environmental Matters

We are subject to numerous U.S. federal, state, local and international environmental laws and regulatory requirements and are involved from time to time in investigations or litigation of various potential environmental issues. We or companies we have acquired are responsible, or alleged to be responsible, for environmental investigation and/or remediation of multiple sites, including sites owned by us and third party sites. These sites are in various stages of investigation and/or remediation, and in some cases our liability is considered de minimis. Notices from the U.S. Environmental Protection Agency or equivalent state or international environmental agencies allege that several sites formerly or currently owned and/or operated by us or companies we have acquired, and other properties or water supplies that may be or have been impacted from those operations, contain disposed or recycled materials or wastes and require environmental investigation and/or remediation. These sites include instances of being identified as a potentially responsible party (“PRP”) under the Comprehensive Environmental Response, Compensation and Liability Act (commonly known as the “Superfund Act”), the Resource Conservation Recovery Act and/or equivalent state and international laws, and in some instances, our liability and proportionate share of costs that may be shared among other PRPs have not been determined largely due to uncertainties as to the nature and extent of site conditions and our involvement.

As of January 2, 2026, we were named, and continue to be named, as a PRP at 113 sites, including 12 sites owned by us, 73 sites associated with our current and former operations and 28 hazardous waste treatment, storage or disposal facility sites not owned by us that contain hazardous substances allegedly attributable to us from past operations. Our estimated liability associated with these identified sites was $659 million and $637 million as of January 2, 2026 and January 3, 2025, respectively. The current and non-current portions of our estimated environmental liability are included in the “Other current liabilities” and “Other non-current liabilities” line items, respectively, in our Consolidated Balance Sheet.

Some of these environmental costs are eligible for future recovery in the pricing of our products and services to the U.S. Government and based on U.S. Government contracting regulations, we consider the recovery probable. We had recoverable assets of $483 million and $462 million as of January 2, 2026 and January 3, 2025, respectively.

Tax Audits

Our tax filings are subject to audit by taxing authorities in jurisdictions where we conduct or conducted business. These audits may result in assessments of additional taxes that are subsequently resolved with the authorities or ultimately through legal proceedings. We believe we have adequately accrued for any ultimate amounts that are likely to result from these audits; however, final assessments, if any, could be different from the amounts recorded in our Consolidated Financial Statements. Additional information regarding audits and examinations by taxing authorities of our tax filings is set forth in Note 7: Income Taxes in these Notes.

U.S. Government Business

We are engaged in supplying products and services to various departments and agencies of the U.S. Government. We are therefore dependent on Congressional appropriations and administrative allotment of funds and may be affected by changes in U.S. Government policies. U.S. Government development and production contracts typically involve long lead times for design and development, are subject to significant changes in contract scheduling and may be unilaterally modified or canceled by the U.S. Government. Often these contracts call for successful design and production of complex and technologically advanced products or systems. We may participate in supplying products and services to the U.S. Government as either a prime contractor or as a subcontractor to a prime contractor. Disputes may arise between the prime contractor and the U.S. Government or between the prime contractor and its subcontractors and may result in litigation or arbitration between the contracting parties.

Generally, U.S. Government contracts are subject to procurement laws and regulations, including the FAR, which outline uniform policies and procedures for acquiring products and services by the U.S. Government, and specific agency acquisition regulations that implement or supplement the FAR, such as the Defense Federal Acquisition Regulation Supplement. As a U.S. Government contractor, our contract costs are audited and reviewed on a continuing basis by the Defense Contract Audit Agency (“DCAA”). The DCAA also reviews the adequacy of, and a U.S. Government contractor’s compliance with, the contractor’s business systems and policies, including the contractor’s property, estimating, compensation and management information systems. In addition to these routine audits, from time to time, we may, either individually or in conjunction with other U.S. Government contractors, be the subject of audits and investigations by other agencies of the U.S. Government. These audits and investigations are conducted to determine if our performance and administration of our U.S. Government contracts are compliant with applicable contractual requirements and procurement and other applicable federal laws and regulations, including ITAR and FCPA. These investigations may be conducted with or without our knowledge or cooperation. We

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are unable to predict the outcome of such investigations or to estimate the amounts of resulting claims or other actions that could be instituted against us or our officers or employees. Under present U.S. Government procurement laws and regulations, if indicted or adjudged in violation of procurement or other federal laws, a contractor, such as us, or one or more of our operating divisions or subdivisions, could be subject to fines, penalties, repayments, or compensatory or treble damages. U.S. Government regulations also provide that certain findings against a contractor may lead to suspension or debarment from eligibility for awards of new U.S. Government contracts for a period of time to be determined by the U.S. Government. Suspension or debarment would have a material adverse effect on us because of our reliance on U.S. Government contracts. In addition, our export privileges could be suspended or revoked, which also would have a material adverse effect on us. For further discussion of risks relating to U.S. Government contracts, see “Item 1A. Risk Factors” of this Report.

International

As an international company, we are, from time to time, the subject of investigations relating to our international operations, including under U.S. export control laws (such as ITAR), the FCPA and other similar U.S. and international laws.

Commercial Commitments

In the normal course of business, we have entered into commercial commitments primarily relating to the guarantee of future performance on certain contracts to provide products and services to customers or to obtain insurance policies with our insurance carriers.

At January 2, 2026, we had the following commercial commitments outstanding:

(In millions)			Commercial Commitment Total						Commitments expiring within 1 Year
Surety bonds used for performance			$	582					$	236
Standby letters of credit used for:
Advance payments			444						255
Performance			701						497
Financial			60						60
Warranty			8						7
Total standby letters of credit			1,213						819
Total commitments			$	1,795					$	1,055

Surety bonds and standby letters of credit (“Performance Bonds”) relate to advances received from customers and the guarantee of future performance, warranty and other purposes. These commitments primarily relate to our ISR and PSPC businesses. Typically, a customer is permitted to draw on a Performance Bond if we do not fulfill all terms of a project contract. In such an event, we would be obligated to reimburse the financial institution that issued the Performance Bond for the amounts paid.

NOTE 16: SUBSEQUENT EVENTS

Segment Reorganization

Beginning fiscal 2026, we streamlined our business segments from four business segments to three business segments, more closely aligning common capabilities and business models. We will report our financial results in the following three reportable segments:

• Space & Mission Systems (“SMS”)

• Communication & Spectrum Dominance (“CSD”)

• Missile Solutions (“MSL”)

SMS will integrate satellite and payload capabilities, including missile warning and defense, with maritime, air special missions, and other global defense and civil government programs. CSD will combine all our capabilities in resilient communications and electronic warfare, while MSL will unite propulsion, hypersonics and other advanced missile technologies.

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The historical results of businesses divested in fiscal 2025 or prior will be reported in the “other non-reportable business” line in the Company’s segment reporting.

DoW Strategic Investment

On January 13, 2026, we announced a strategic investment by the DoW in connection with our MSL business. Pursuant to the terms of the proposed transaction, the DoW has agreed to be the anchor investor through a $1.0 billion convertible preferred security. This security is anticipated to automatically convert into common equity upon the completion of an IPO of the MSL business.

We currently intend to pursue an IPO of the MSL business in the second half of 2026, subject to prevailing market conditions, receipt of required regulatory approvals, and satisfaction of other customary factors. Upon completion of the transaction and any subsequent IPO, we expect to maintain a controlling interest in the MSL business. The proposed transaction is subject to the negotiation and execution of definitive agreements, as well as the fulfillment of customary closing conditions.